A bill that requires employers to pay into a pension scheme of the employee’s choosing was brought forward by Anthony Browne, MP for South Cambridgeshire, has passed to have its first reading in the House of Commons.
His Private Members Bill, known as the Pension Contributions Bill, would enable employees to build up a “pot for life” rather than accrue multiple pensions from each employer they have during their career. The Bill gives employees the right to direct their employer’s pension contribution to their own pension, rather than the employer’s pension scheme. It was brought forward by Mr Browne as a 10 Minute Rule Bill.
The Bill seeks to tackle the growing challenges caused by multiple pension pots. With most employees now expected to have up to 11 employers in their lifetime, many people find it increasingly difficult to track them all. The Pensions Policy Institute estimates that in 2020 there were 8 million deferred pension pots, with their value having grown from £19.4bn in 2018 to £26.6bn last year.
The objective of a “pot for life” or lifetime provider model is that workers have a single pension pot, so they can easily manage it and know the extent of their savings. Members can remain with the same provider their whole working life, even when they switch jobs (although they are also free to switch provider). On starting a new job, the employee could give their bank account details for their salary to be paid into, and pension details for the pension contributions to be paid into.
The Government has already taken several steps to solve issues with multiple pension pots, including launching a new dashboard to allow people to track their pots and allowing pension holders to consolidate their pots. Mr Browne’s Bill proposes a small legislative change, that would give the right to employees to opt out of their company pension scheme without losing pension contributions. A new employee would be given the right to direct their own and their employer’s contributions to a provider of their choice – including to an existing fund they have.
The Bill passed the House without a vote and has been scheduled for a Second Reading debate amongst other Private Members Bills on March 17th.
Mr Browne later commented: “Ultimately, it is my belief that pension savers should be at the heart of our pension system - and the north star of our pension policy should be a pot for life.”
“Currently, we have a lose-lose situation for pension members and pension providers, and the solution to the Government goes for will shape the pension landscape for a generation. My solution will help employees make informed decisions and restore trust in our pension system. I hope this bill brings wider attention to the issue, and I will continue to campaign for reform in this area”