Labour has attacked the government for opting for a ‘pot follows member’ solution, arguing the policy does not put savers’ interests first.
Shadow pensions minister Gregg McClymont says the Department for Work and Pensions should have gone for the ‘aggregator’ approach, whereby small pots would only be automatically transferred to low-charge trust-based arrangements, rather than following employees to schemes offered by commercial providers that could have higher charges.
McClymont says employees should be given the ability to switch their pot to their new employer’s pension scheme if they choose to do so, for example if it offered better terms and conditions.
The attack marks an escalation of Labour’s war on workplace pension charges that saw Ed Miliband accuse providers of high charges last week.
McClymont says: “Today’s announcement is not the best deal for pension savers. Ministers must put the saver’s interest at the heart of what they do. Steve Webb’s proposals on small pots fail this test. The Government’s statement today could misleadingly give the impression that they have widespread support for their proposals – they do not.
“Right now, a pension saver could lose up to half of their pension thanks to hidden costs and charges in some of the worst cases. The Government’s announcement today risks making a bad situation for the saver worse.
“This announcement comes on the same day that the Office for National Statistics reveals a further decline in the number of people saving into pensions. This is why Labour is calling for a new deal for private pension savers.”