NOW: Pensions proposes pensions clearing house solution to small pots consultation

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For immediate release: 2nd April 2012

In its response to the DWP’s consultation on small pension pots, NOW: Pensions, the multi-employer trust backed by ATP, proposes a model which combines the benefits of the aggregator model with certain aspects of the job-to-job pension proposal.

Morten Nilsson, CEO of NOW: Pensions, explains: “The simplicity of this model and its ability to promote good retirement income will ensure higher participation in the industry, as members possess key decision-making power.  In addition, by default, smaller pots are auto-consolidated in order to help members track them, and annuitise more effectively on retirement.”

The “Clearing House” solution proposed by NOW: Pensions is as follows:

  • After 3-6 months non-contributing members in a pension scheme will become deferred. Members will be contacted at that point, informing them that their pot will be transferred out of the scheme within a given time period, perhaps 30 days. Unless they opt for an alternative or decide to remain in the previous employer’s scheme.
  • Members will be identifiable by their National Insurance numbers, ensuring integration with auto enrolment.
  • “The Pensions Clearing House” is a simple intermediary between schemes and the aggregators, and acts as a portal instructing the ceding scheme to allocate the pot to one of the 3-5 aggregators. The distribution will depend on whether the member already has a pot at any of the aggregators; if a member has none, the clearing house will distribute the pots on a prescribed basis allocating them equally between each of the schemes initially.
  • The aggregators will build and finance the operations of “The Pensions Clearing House” – this keeps the small pots issue within the private sector. Aggregators will be required to pay the clearing house for use of its services; the administration work and ensure the pots are allocated correctly.
  • Aggregator schemes are motivated to provide a good service to members both because of competition and government monitoring and guidelines. If an aggregator fails to perform according to a set of predetermined KPIs over a given period of time, they will be removed as a certified aggregator.
  • Members at any point can transfer their pots out of the aggregator to consolidate with a new provider – in this case the aggregators will bear the costs of transfer.
  • In the future, members will be able to find their retirement savings via the clearing house. The clearing house will provide a system that enables members to track their savings and can put them in touch with the aggregator to find out how much has been accumulated.

Nilsson continued:  “We believe that this model will allow people to keep track of their pension savings and thereby encourage people to take an interest in their savings, and the fact that there will be fewer small pots to administer will increase the efficiency of the industry – to the benefit of the member.”

Nilsson concluded: “The problem of small pension pots in schemes is set to become a major obstacle for the pensions industry in the UK and if a system of consolidation is not put in place, it could neutralise the benefits of auto-enrolment.  We have based our submission on our experience in Denmark, which has shown how important it is for members to have the right and ability to move their pots, and an easy means of getting a clear picture of future retirement income.”

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For further information:

Shirley Hatherton / Jennifer Stevens / Pippa Gibb
Lansons Communications
Tel: +44 207 294 3615 / +44 7711 142 147

Notes for editors:

NOW: Pensions

NOW: Pensions is a new multi employer trust, which has been operational from 1 January 2012. The investments are managed by NOW: Pensions Investments, a subsidiary of ATP inDenmarkand the administration is carried out by Paymaster, an establishedUKthird party administrator.

The NOW: Pension Trustee Directors, whose role is to safeguard the interests of members, comprises well-known industry figures with different areas of expertise:

  • Nigel Waterson, former Shadow Pensions Minister
  • Imelda Walsh, former Group HR Director of Sainsbury’s
  • John Monks, member of House of Lords and former General Secretary of ETUC and TUC
  • Christopher Daykin, former Government Actuary
  • Lars Rohde, CEO of ATP Group
  • Win Robbins, former Head of European Fixed Income at Barclays Global Investors

NOW: Pensions is committed to developing a better workplace pensions provision in the UK by offering a simple, systematically risk managed, cost efficient and high performance pension product that delivers better retirement savings for UK employees. With over 45 years experience providing Denmark’s working population with stable and consistent pensions returns, NOW: Pensions is set to transfer the knowledge acquired in Denmark to the UK pension market ready for auto-enrolment in 2012, charging just £1.50 per month administration charge (reduced administration charge of £0.30 – £1.00 to be applied during auto enrolment phasing for lower earners) plus a 0.3% annual product investment management charge, with no hidden charges.

The ATP Group

Arbejdsmarkedets Tillaegspension (ATP) / Danish Labour Market Supplementary Pension is a statutory pension fund. It was established as an independent entity in 1964 with the objective of ensuring a greater retirement income for the Danish population. ATP has since developed to become the largest pension fund inDenmark. Together with the tax-financed basic state pension, ATP provides basic income security in old age for the Danish population.

ATP covers almost the entire Danish population representing 4.7 million members and 160,000 employers. In addition to the ATP Scheme, the ATP Group administers a number of pension and social insurance schemes, including several for the Danish state.

The ATP Group assets amounted to approximately DKK 579 billion (GBP 65bn) and DKK 74 billion (GBP 8.3bn) reserves at 31 December 2011. ATP invests in a wide variety of assets globally. Investment categories are broadly: equities, interest rates, credit, inflation and commodities.

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NOW: Pensions has a good technical infrastructure combined with a pension product suitable for our team. We couldn’t be happier with NOW: Pensions.
Martin Woods,