The Department of Work and Pensions' (DWP) small pots initiative has recently prompted debate on some "quite whacky ideas" for solutions, a solutions provider has said.

Regarding the first of these proposed solutions, 'virtual aggregator', Altus said that the operations of most life offices are highly complex and they struggle to provide a 'consolidated view' for their own customers; therefore providing such a view across the whole industry "won't be practical any time soon".

Concerning 'scheme follows member', Altus said that the operational practicalities of every employer engaging with every pension provider are 'unthinkable' given the common problems that still arise in dealing with just one.

Altus director Ben Cocks said: "In both of these cases, the pension pot of the long suffering employee is left languishing with the old provider; quite possibly at less favourable rates than their new employer's scheme.

"Supporters of each approach will refer to new technology that can solve the problem if the government is prepared to spend enough - but in my experience a big centralised government IT project is rarely the right answer to anything."

He added that he is supportive of the 'pot follows member' approach, which is preferred by pensions minister Steve Webb, as it at least addresses the problem in hand.

He said it could work without a huge central spend if the industry gets behind the TISA open standards approach to transfers.

Cocks added: "Perhaps of greater importance, creating a framework where customers can easily move their pensions between providers might also allow competition in the market to work more effectively."

First published 23.10.2013

monique_simpson@wilmington.co.uk