If a worker has had more than one employer in their working life, they are likely to have accumulated multiple pension pots. Whilst some may choose to continue to pay into a former employer’s scheme, most will choose to leave.
In other cases, it may be the employer that chooses to leave the scheme, triggering a bulk member leaver process. Our latest insight looks at workplace pension providers’ processes for scheme leavers, where the adviser is kept in the loop, and what information is provided to leavers and when.
The average UK worker has over six different jobs through their working life. With auto enrollment leading to almost 8 in 10 workers paying into a workplace pension (Pension participation data from 2020 workplace pensions data report by Office for National Statistics), an increasing number of workers are joining and leaving multiple schemes during their working life.
The growth in multiple pension pots has been recognised as a problem with the government developing the Pension Dashboards Programme to help workers see a consolidated view of their retirement savings and track down lost pots.
Our data shows that the adviser may be kept out of the loop by some workplace pension providers when the leavers process is triggered. Which can cause issues later down the line.
Less than half (42%) of workplace pension providers will notify the adviser if a member leaves their workplace pension scheme.
Aviva Designer, Aviva My Money, Aviva My Money Master Trust, Fidelity, Fidelity Master Trust, and Mercer Master Trust Aviva will notify the adviser manually (via a call or in writing), and electronically. A ceasing of regular payment notification is also generated automatically via the payroll.
Royal London and True Potential will notify the adviser electronically and a ceasing of regular payment notification is also generated automatically via the payroll.
Standard Life and Standard Life DC Master Trust will not notify the adviser directly, but the adviser will receive a ceasing of regular payment notification via the payroll.
When a member choses to leave a workplace pension scheme there is inevitably a large amount of paperwork in the form of leaver documents. These documents are dispatched within a week.
Other than for Aegon Master Trust and Aegon Workplace ARC the adviser can also receive a copy of the member leaver documents from all providers.
Included in these documents there is a leavers pack. This pack must detail all options available to them. Typically, this entails a personalised letter along with a brochure that explains the options to the member in more detail.
Our data also shows that all workplace pension scheme leavers keep their online access, so despite leaving the scheme, they can still view and manage it digitally.
For those who leave the scheme without choosing to transfer funds elsewhere, workplace pension provider systems are all able to automatically identify members near retirement and flag this. Just over half will also flag this to the adviser.
The providers who do not flag this to the adviser are Fidelity, Fidelity Master Trust, Hargreaves Lansdown, Legal & General, Legal & General Master Trust, Mercer Master Trust Scottish Widows, Scottish Widows GSIPP, Scottish Widows Master Trust and True Potential.
The remainder will notify the adviser within a minimum of 6 weeks before the normal retirement date. Most will flag at the 6-month point. Aegon Master Trust offer the only flexible choice option which can be configured to the adviser’s requirement.
Members who have left the scheme are also sent wake up packs and retirement options documentation. These are sent out between 16 years before the target retirement date (Aegon Master Trust, and Aegon Workplace ARC) and 6 weeks before (Scottish Widows). Only True Potential does not provide these to members who have left the scheme.
For Aegon Workplace ARC, Aviva Designer, Aviva My Money, Aviva My Money Master Trust, Royal London, and Scottish Widows this is also available online and a copy sent to the adviser.
When a member leaves the employer, workplace pension providers will approach the Group Pension arrangement different.
For Aegon Master Trust, Aegon Workplace ARC, Aviva Designer, Aviva My Money, Aviva My Money Master Trust, Fidelity, Fidelity Master Trust, Mercer Master Trust Scottish Widows, Royal London, Scottish Widows, Scottish Widows GSIPP, Scottish Widows Master Trust, Standard Life, Standard Life DC Master Trust and True Potential the benefits are treated as paid up.
Legal & General, Legal & General Master Trust and Standard Life GFRP will move the contract to an individual arrangement with it being treated as a new contract. Pricing will remain the same as the previous contract.
For Aegon Workplace ARC, Aviva Designer, Aviva My Money, Aviva My Money Master Trust, Mercer Master Trust Aviva, Royal London, Scottish Widows, Scottish Widows GSIPP and True Potential the contract moves to an individual arrangement under the same contract plan.
For Fidelity and Fidelity Master Trust, if leavers would like to continue contributing they will be moved to an “orphans” plan.
Mercer Master Trust Scottish Widows and Scottish Widows Master Trust leavers can retain the existing plan. However Scottish Widows Master Trust leavers will not be able to make further contributions.
Other than for Hargreaves Lansdown, the adviser who set up the scheme can continue to access information for leavers.
All workplace pension providers also offer a drawdown facility for post-retirement benefits for scheme leavers. However, for Scottish Widows this is not delivered via the product and the leaver will need to transfer to its Retirement Account product to access a drawdown facility.
Should it be the employer who chooses to leave the scheme, or an adviser recommends multiple clients move away from a scheme, our data shows that all workplace pension providers have an automated bulk member-leaving process.
Overall, workplace pension providers offer a simple leavers process with all necessary documentation provided to the leaver in a timely fashion. It is however worth noting that many do not keep the adviser involved in the process.
It is also worth noting that whilst most leavers will be able to access a drawdown facility and even continue contributions under an individual arrangement, leavers of a Scottish Widows scheme will need to transfer to a different product to access drawdown.