Plans to introduce a ‘pot for life’ for employee pensions will no longer go ahead, according to the Department for Work and Pensions.
The previous government had proposed introducing a lifetime provider model (LPM), which would allow employees to have a single pension scheme throughout their working lives, irrespective of how many jobs they have had.
In last year’s Autumn statement, then chancellor Jeremy Hunt said the government would give workers the right to decide on the scheme their employer pays contributions into.
However, Andrew Blair, head of auto-enrolment and Nest policy at the DWP, told members of the Chartered Institute of Payroll Professionals (CIPP) this month that the government is “not pursuing [the LPM] at this point in time”.
Pensions news
The announcement is likely to be welcomed by HR and payroll professionals, who feared the LPM could lead to additional administration burdens.
Earlier this year, analysis by the Pensions and Lifetime Savings Association found that there was “little evidence” that the model would be beneficial to savers.
The PLSA said that the model would “disproportionately impact less wealthy and less informed” savers, who currently benefit from the bargaining power and governance of their employer.
Samantha O’Sullivan, policy and advisory lead at the CIPP, said: “We’ve worked closely with our members to give them a platform to raise their concerns regarding the proposed lifetime provider model for pensions.
“We are pleased that, following our ongoing consultation with the DWP, our voice has been heard because payroll professionals would’ve faced the brunt of the increased workload with this new model.
“Payroll departments are already under huge pressure to pay employees accurately and on time, and with the budget on the horizon, we’re expecting more changes in the coming months.”
Although the Labour government has reportedly scrapped plans to apply national insurance to employer pension contributions, there could still be changes to pensions in this week’s Autumn budget.
These could come in the form of changes to tax-free cash withdrawals from pensions, or a flat rate of tax relief on pensions.
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