DWP launch Small Pots Working Group
22 September 2020
Without action it is estimated that by 2035 there will be 27 million deferred pots.
At a virtual launch of the Small Pots Working Group, Minister for Pensions and Financial Inclusion, Guy Opperman, said:
“Automatic enrolment has transformed the way people save for retirement, meaning millions more can look forward to a more secure future.
With the launch of the cross-sector Working Group and our ongoing efforts to make Pensions Dashboards a reality, we are focused on ensuring that consumers can stay on top of their pension savings, make more informed choices about their financial futures and have real returns from their savings.”
The Minister, speaking at the event led by the Department for Work and Pensions and supported by the Pensions Policy Institute (PPI) and Now: Pensions, confirmed the Working Group will report later this Autumn with an initial assessment, recommendations and an indicative roadmap of actions for industry, delivery partners and Government.
The Government is also working with stakeholders to ensure the delivery of Pensions Dashboards, that will enable consumers to see what pension pots they have, online and in one place and the Small Pots Working Group will compliment this work and seeks to identify the priority option or combination of options to help tackle the growth of deferred, small pension pots.
A small deferred member pot arises when an employee and their employer stop contributing to the pension scheme. This may occur when an employee leaves their employment or can happen when the employee has missed the opt-out window. If the employee fails to monitor their deferred scheme, there is a risk that some small pots will be eroded to nil or be so small as to be almost worthless at the point of retirement.
Many solutions to this problem have been discussed over recent years. During the summer of 2020 the Pensions Policy Institute (PPI) published a report to detail the possible policy options that could be delivered to tackle the growing number of deferred members with small pots.
The proposals considered within the PPI report include:
- Pot follows Member
- Lifetime provider
- Same provider consolidation
- Default consolidator
- Member exchange
The PPI have published a summary report Small Pots and why they matter.
Automatic enrolment pensions policy has been successfully delivered by 1.7 million employers resulting in 10 million employees now engaged with pension saving. Let us help make every penny saved count towards life in retirement.
The CIPP policy and research team are working alongside other stakeholders on this project and will be gathering evidence from the payroll sector through surveys and discussion. Questions will include:
• How practical are the proposed solutions?
• Are there other options that could be explored?
• What are the main barriers to implementing solutions?
• How might these be overcome?
Please contact [email protected] to register your interest in this subject. The needs of the consumer will be at the heart of this work and the views of the whole payroll profession, including software developers, payroll bureaux, bookkeepers, accountants and employers are essential to ensure the right solution is taken forward.
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