The small pots issue: a consultation
01 February 2023
With the success of automatic enrolment comes a side effect that could cause issues further down the line. Many pension savers still move jobs frequently and leave behind a trail of small pension savings accounts, known as deferred small pots.
With pensions dashboards on the horizon, despite delays, awareness of these pots is due to grow. However, this still leaves the issue of what to do with them once savers are aware of them.
The Department for Work and Pensions (DWP) is looking for views on different solutions to this problem. The consultation proposes different methods of automatic consolidation, each with various pro and cons. Once a process for consolidating pots has been agreed there is the secondary issue of the pots that have already built up.
The DWP will be assessing the solutions against 5 main criteria:
- Delivery of overall net benefits for members through improved value for money outcomes, achieving a meaningful impact on the number of existing, and flow of new, deferred pots.
- Complements member engagement on their savings journey/retirement planning.
- Supports a competitive, sustainable and more efficient workplace pensions market (trust and contract-based schemes).
- Minimising complexity and administrative burdens for employers.
- Commands confidence in the system for savers and taxpayers.
The CIPP welcome any comments or suggestions regarding this consultation. We are part of the Small Pots Cross-Industry Co-ordination Group mentioned within the document and have been involved in getting the proposals to this stage. If the consultation is relevant to you or your business, we encourage you to submit a response. However, you can email [email protected] if you have any comments that you would like us to take forward.
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.