Workers will be able to take their pension pots with them when they change jobs from autumn 2016, the Department for Work and Pensions (DWP) has announced.
The measure is designed to avoid employees accumulating different pots every time they change jobs. Under the current system, workers risk losing track of savings made in previous jobs.
Originally announced in 2014, the DWP has confirmed that pension pots worth under £10,000 will automatically follow individuals to their new workplace. Workers will initially be given the option to merge their pension pots before the automatic transfer system is introduced.
Automatic transfers will only apply to larger schemes at first before the system is rolled out to smaller providers.
Pensions Minister Steve Webb said:
“If we fail to take action there could be over 50 million dormant pension pots drifting away from savers by the middle of this century – that’s billions of pounds floating around that should be funding better retirements for people.
“Auto-enrolment is helping people to save for retirement, but we must help them to keep their pots together so they know clearly that their pension is growing for their future. With the average person now having 11 jobs in their career, this further reform is essential.”