PRESS RELEASE : Efforts to tackle small pension pots step up a gear [February 2024]
The press release issued by the Department for Work and Pensions on 8 February 2024.
New group comprised of government and pension industry representatives to look at helping savers track their pensions.
Members will discuss the design and implementation of the proposed new consolidation system as part of new Small Pots Delivery Group.
This represents a vital step in delivering greater value for money which could benefit the average saver by £700 at retirement.
A new group designed to help savers track their pensions was launched yesterday (7 February) by Pensions Minister Paul Maynard.
The new system is designed to put savers first and ensure a better functioning pension market. It involves a small number of authorised schemes working to consolidate small pension pots on behalf of savers.
Pensions Minister Paul Maynard said:
Deferred small pots are costly, inefficient, and hard to keep track of.
This group will help in crafting a cost-effective and efficient system, ensuring better financial security and greater value for money for millions of savers.
Deferred small pots are small pension pots left inactive, often from a previous job, and typically contain small amounts of money.
Currently, these are a drag on the pension system making it harder for people to make informed decisions about – and keep track of – their pension, reducing the amount they may have in retirement. Some savers even lose track of their pots altogether due to having multiple pots from different jobs.
The successful introduction of Automatic Enrolment in 2012 brought millions of workers into workplace pension saving, often for the first time. In 2022 for example, employees across the UK saved £116 billion into their pensions – a real-terms increase of £29 billion compared to 2012.
However, with this has come rapid growth in the number of deferred small pots – without intervention this could result in annual administrative costs by 2030 of up to £225 million.
Helping to deliver on the chancellor’s Mansion House reform package, the new Small Pots Delivery Group will provide recommendations on how best to implement the proposed multiple default consolidator approach – which was set out in the government’s consultation response in November 2023.
Further Information:
- This work comes on top of wider initiatives, including multiemployer Collective Defined Contribution (CDC) schemes, the Value for Money Framework, and the development of decumulation products. Combined, these could improve the opportunity for investment and deliver better outcomes for members.
- The Delivery Group will be chaired by the DWP and has representation from:
- The Financial Conduct Authority
- The Pensions Regulator
- Pension and Lifetime Savings Association
- Association of British Insurers
- Pensions Administration Standards Association
- Chartered Institute of Payroll Professionals
- Association of Pensions Lawyers
- Which?
- Federation of Small Businesses
- Confederation of British Industry
- Chair of the industry led Small Pots Coordination Group
- Pensions Policy Institute
