Autumn Statement 23: Chancellor launches consultation on ‘pot for life’ model

Chancellor, Jeremy Hunt, has announced plans to offer employees a choice on their workplace pension provider as part of his Autumn Statement, in what industry experts have suggested could represent a “ground-breaking” shift for the pensions industry.

The call for evidence aims to gather views on a long-term vision for workplace pension saving in the UK, focusing on whether a lifetime provider model would improve outcomes for savers, how the government can grow the collective defined contribution (CDC) market, and whether there are synergies between the two.

Under the proposed pot for life or lifetime pension model, savers would be given the option to ask a new employer to pay pension contributions into their existing pot, with similar approaches already taken by countries such as Australia.

However, the DWP said that it also welcomes views on possible alternative long-term visions it could set out, and what the evidence shows in regard to this.

The Autumn Statement documents confirmed that the the government would also be pushing forward with its plans to introduce the multiple default consolidator model for defined contribution (DC) schemes, to enable a small number of authorised schemes to act as a consolidator for eligible pension pots under £1,000.

Former Pensions Minister, Laura Trott, previously confirmed to Pensions Age that the government was looking at the possibility for a ‘pot for life’ model, clarifying that there is “a lot of work that has to go into looking at this and while that is work that is going on at the moment, we don’t have a firm position on it”.

Trott also explained at the time that while the government was looking at a default consolidator to tackle the small pots issue, “obviously that deals with the stock rather than the flow”, with a pot for life instead looking to tackle the future flow of small and lost pots.

The government has faced growing pressure to consider broader system changes such as a pot for life approach, with a pot for life industry lobby group launched earlier this year, urging the government to adopt its proposals as soon as possible.

Proposals for a lifetime pension provider model were also previously raised as part of a bill from MP Anthony Browne, which aimed to give employees the right to have their employer pay their pension contribution to a pension of their own choosing,

However, industry experts have warned that the potentially “seismic” change could present a number of concerns, warning that savers would need better financial education and support in making these decisions, while employers could face administrative challenges.

Alongside a call for evidence on a lifetime provider model to simplify the pensions market by allowing individuals to move towards having one pension pot for life, the Autumn Statement documents confirmed that the government will consult on a potential expanded role for collective defined contirbution (CDC) schemes in future.

In addition to this, the government will share an update on its plans to require DC occupational pensions trustees to offer decumulation services and products at an appropriate quality and price when savers access their pension assets, either themselves or through a partnership arrangement

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