The Department of Work & Pension has set up a taskforce to address the issue of small pension pots that are proliferating within workplace pensions.
The move has been welcomed by the industry. Announcing the launch of this cross-sector working group, the minister of pensions and financial inclusion Guy Opperman said this will complement work to make the pensions dashboard a reality.
Opperman says: “We are focused on ensuring that consumers can stay on top of their pension savings and make more informed choices about their financial futures and have real returns from their savings.”
There are growing numbers of small pensions pots within the AE sector, most of which are from workers who have moved jobs or been made redundant.
Currently it is estimated there are around eight million deferred pension pots. But research by Now Pensions estimates that this could mushroom to 27m by 2035 without action.Now Pensions says this trend will be accelerated by redundancies created by the Covid-19 crisis.
Now Pensions director of policy Adrian Boulding says: “We are so pleased that the Department for Work and Pensions has announced that it will be creating a taskforce to review the issue of increasing numbers of small deferred pots.
“A worker has exactly the same needs in retirement whether they’ve had one single job for life or whether they’ve worked for 10 different employers.
“Having multiple pots can be detrimental to savers as they fail to benefit from economies of scale, can be hit by multiple investment costs, and can lose track of their pensions, which exacerbates the long-standing problem of lack of comprehension and the value of saving.”
Boulding will be on this new working group, representing master trusts.
The People’s Pension head of policy Tim Gosling says: “We welcome the government taking the significant step of setting up a working group to examine this very important issue.
“The proliferation of small pots is a growing problem. Both for those who end up with a trail of small pots, potentially losing track of them and incurring higher charges, and for all other savers whose savings cross-subsidise the large number of pots that are not sufficiently large to even cover the costs of running them.”