Pension dormant account proposal should wait for Dashboard
6 March 2018
The government should wait until the introduction of pension dashboards next year before legislating on extending the dormant assets scheme to include pension assets, said Kate Smith, head of pensions at Aegon.
The independent Commission on Dormant Assets has said that there is a significant potential to expand the dormant assets scheme to a wider range of asset classes across the insurance and pensions, investment and wealth management and securities sectors. It added that there had been a strong interest from insurance and pension firms in participating in an extended scheme.
The dormant assets scheme, launched in 2008, encourages firms to reunite customers with their assets, in addition to using assets to support good causes.
Smith (pictured) said that although the principle of expanding the scheme appeared to be “sound”, pensions are long-term assets and should by their nature be treated differently from cash assets held in banks and building societies.
She commented: “Pensions are invested in fluctuating investments, which means, unlike cash, the value will change. It’s common for people to save in a pension, and then not touch it for many years until they come to retirement, or even into later life. It’s therefore difficult to set an arbitrary term of say 15 years as a meaningful way of describing pension assets as dormant.
“The reality is that pension providers already make considerable effort to reunite individuals with their pensions. The introduction of pension dashboards in 2019, will also help individuals find long-lost pensions. This should reduce the number of pension dormant pots and the Government should therefore wait before legislating.”
Smith pointed out that the current scheme states that there should be no detriment to customers and individuals are able to reclaim any transferred assets in perpetuity.
“The scheme would need to ensure it held enough assets for individuals to reclaim their pension, perhaps with solvency standards similar to those for PRA regulated firms. The government should be consulting widely with the pension industry to devise a workable solution,” she added.
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