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Small DC pension pots: new framework for automatic transfer

Following a consultation exercise, the Government plans to introduce legislation providing for the automatic transfer of defined contribution (“DC”) pension pots up to a limit yet to be decided, but likely to be between £2,000 and £20,000.

Individuals will not have to obtain financial advice before a transfer and will have the right to opt out. Short service refunds from DC occupational schemes will be abolished, but “micro-pots” can still be commuted into a lump sum, up to a limit yet to be decided.

The new framework will only apply to automatic enrolment schemes and so will not cover pension pots accrued to date or pots that arise where an individual is enrolled under his employment contract outside the automatic enrolment regime. The proposals are unlikely to come into effect until 2015/16 at the earliest.