Pension shake up set to have serious problems

The government has recently outlined new plans which are going to see a change in the way some pensions work in the country. The plans, if implemented, would mean that when you leave the job your pension comes with you. While this does seem like a beneficial scheme on the face of things, it does have a serious problem.

This main issue is that people will be involved in something of a pensions lottery. Every time that they change jobs, they might be moving into a pension scheme that is better or worse, and it becomes part of the gamble of changing jobs.

The National Association of Pension Funds has stated that when people move they might be subject to a larger management charge. This could be up to double the amount that was associated with the previous accounts which would mean that they could lose a significant amount of money over the lifespan of the pension saving.

The association suggested that a better way of doing things would be to allow people to move their pensions into an aggregator system that is actually centralised and has a low cost. This would be better than moving the pensions around as people change jobs, as it would reduce the amount of uncertainty associated with the change.

The Chief Executive of the association is Joanne Segars and she stated, “The government are clearly outlining a way for people to move their pension if it is relatively small. It doesn’t however look at the charges or the possibility of poor governance of a new scheme.

What we would see as the development of a pensions lottery and people would have to move pension funds without necessarily being aware of the impact that this would have on their investments.”