An expert has suggested that pensions could become like a bank account into which different employers would pay, following reports that a change would be unveiled in the autumn statement.
According to the Financial Times, measures could be outlined in a call for evidence on Wednesday, which would potentially enable workers to nominate the pension scheme they want their employer to pay into.
Currently, employers automatically place employees into the plan that is selected by the company.
When a person moves from one job to another, this can create multiple pension prospects, some of which could potentially be eliminated.
Becky O’Connor, director of public affairs at PensionBee, said the “pot for life” could help people connect with their pension and promote competition within the industry.
He said: “(A) Pot for Life is a great solution to the problem of people who have lots of old pensions from multiple jobs.
“Pension can be like a bank account, into which payments can be made from different employers. This is good for savers, giving them more say over how they want to grow their retirement funds and, hopefully, a decent solution to the problem of lost pension money.
“Pot for Life has the potential to shake up the industry, bringing forward what consumers really care about, boosting competition and bringing the way people engage with pensions in the 21st century.”
But former pensions minister Sir Steve Webb, who oversaw the introduction of auto-enrolment, raised concerns that the ability for employers to “bulk buy” could be lost.
He said: “Workplace pensions are currently a wholesale business where employers negotiate good value deals for their entire workforce.
“As a result, the average workplace pension charge is currently less than 0.5%. If the system broke down, this bulk purchasing power of employers would be lost.
“The marketing burden will be placed on top earners as pension providers try to select the most profitable businesses. But the remaining workers will no longer have access to such good workplace pensions.
“There is also the question of how any of us should compare different pensions. We are not only asked to look at costs and charges, but are we really expecting consumers to evaluate the different investment strategies of their different pension providers?
Sir Steve, now a partner at consultants LCP (Lane Clark & Peacock), said there were much simpler ways of dealing with the issue of small or lost pension pots “rather than putting a bomb under the entire workplace pension scheme”.
Mark Futcher, a partner at consultancy Barnet Waddingham, said: “A sudden change to the ‘pot for life’ puts people at risk of choosing a sub-optimal pension scheme, influenced more by marketing than value, and ultimately by the UK. “exacerbates the retirement crisis.”