Anthony Browne - MP for South Cambridgeshire and chair of the Treasury Select Committee - will put forward a Ten Minute Rule Bill for the second time on 17th March, which proposes giving employees the right to have their employer pay their pension contribution into a scheme of their own choosing, rather than one chosen by their employer.
The bill proposes making what Mr Browne calls a "small legislative change", which will give employees the right to direct their own pension contributions, plus those of their employer, to a provider of their choice - making sure however that the employer’s contributions stay the same value as the contributions it makes to its existing company scheme. In that way those employees who opt out are not penalised. Additionally, if you have multiple jobs, all your employers would pay into your same single pension.
The objective is a pot for life, sometimes known as the lifetime provider model, so that employees have a single pension pot that they can easily manage and know the extent of their savings.
Mr Browne described the proposal as a “small reform that could, over time, be revolutionary, because if an employee moves jobs, they can keep the same pension, and get the new employer to pay into it, rather than being forced to set up a new one”.
He added:
“My proposal would allow people to build up a pot-for-life, and they would choose the provider.”
In an article on Conversative Home, Mr Browne states that in 2020, the Pension Policy Institute (PPI) estimated that there were eight million deferred pension pots, holding tens of billions of pounds of savings. Whilst many of them are small -according to the Association of British Insurers 2.2 million deferred pots contain under £1000 - the PPI estimate there will be 27 million deferred pension pots by 2035. With so many pots, it becomes easier for people to lose track of them, indeed it is estimated there are now 1.6 million pensions that are lost.
Browne’s long-term aim is that it would be the norm for pension savers to have a single pot for life, making it easier for employees to keep track of their savings and to help ensure a comfortable retirement.
Browne also clarified that this proposal is intended as a "supplement to, rather than a replacement for, the different proposals that the government are currently considering".
This year, the Department for Work and Pensions’ (DWP) is launching the Pensions Dashboard, which will allow people to see what they have in their various pensions - including their State Pension - in a single place online, at any time they choose. However, according to Browne, this “doesn’t stop millions of pension pots proliferating in the first place.”
