The Small Pension Pots Working Group holds its first meeting
25 March 2021
On 24 March 2021, the Small Pension Pots Working Group held its first session. The Minister for Pensions and Financial Inclusion, Guy Opperman, attended the meeting.
The group was formed to address the issue of the ever-increasing number of small, deferred pots in the pension system, prompted by the introduction of Automatic Enrolment (AE) back in 2012. The problem seems to arise where those saving towards their retirement move jobs and lose track of their existing savings.
Small pension pots present challenges for both savers and for schemes. The small balances of these inactive pension pots often get completely swallowed by costs and charges, and where individuals have multiple pension pots, it makes it harder for them to keep track of their savings. It is also more burdensome for pension schemes to administer small pension pots, as opposed to administering larger pension pots.
Research highlights the fact that, at present, there are more than eight million deferred pension pots, and eight million active pots in master trust schemes. There are many more in other Defined Contribution (DC) schemes. It is perceived that, in master trusts alone, by 2035, there could be approximately 27 million deferred pension pots and nine million active pots if no action is taken, hence why the group was formed to tackle the problem.
The aims of the Small Pots Co-ordination Group are to explore current data-matching requirements, data standards and to look at the requirements for a low-cost transfer process for mass consolidation. The Group will also direct work across the industry, “focusing on the administration processes that will underpin a future long-term consolidation model in the interests of savers.”
Guy Opperman said:
“Given the risks that the growth of deferred small pots presents to savers and their ability to plan for retirement, it is imperative that we find a solution.
I'm very pleased that representatives from across the industry are now convening to consider ways to combat this, and their progress reports will provide valuable insight for tackling this issue together.”
The Pensions and Lifetime Savings Association (PLSA)’s full press release is available here.
CIPP comment
The CIPP sits on the Small Pension Pots Working Group, with the intention of conveying the views of the payroll profession in relation to this ever-growing issue. If you have any feedback you would like us to provide at the next meeting, then please send it across to the Policy team, at [email protected]. Thank you in advance.
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