Pensions - Articles - Industry comments on DWPs Small Pots Working

Industry comments from TPR, PLSA, Dalriada Trustees and LCP on the DWPs Small Pots Working report

 Commenting, David Fairs, TPR’s Executive Director of Regulatory Policy, Analysis and Advice, said: “We are pleased to see industry working together with government and regulators on the issue of small pension pots.

 “Our strategic goal for members of DC schemes is savers get good value for their money and this means costs and charges must be kept at a reasonable level.

 “We look forward to continuing to work with industry and government to ensure any solutions developed will be in the best interest of all DC members and will deliver improvements in the value of savers’ outcomes.”


 Lizzy Holliday, Head of DC, Master Trusts, and Lifetime Savings, PLSA, said: “Small pots generally don’t work for savers for a number of reasons – such as the impact of charges on multiple small pots for a saver which can be detrimental over time, and the possibility of savers losing track of their savings. Addressing these issues has been at the core of PLSA’s small pots project – including our own Master Trust Working Group.

 “We welcome the additional impetus and ambition from government on this key issue, and its engagement with us and the industry. The report is consistent with our earlier work – and we welcome the direction of travel and solutions indicated – such as focussing on options that work well with Automatic Enrolment, member exchange pilot, and moving to improve pension administration to facilitate cheaper, more efficient, transfers. 

 “The PLSA are excited to continue working with our members next year on implementing the actions recommended in the roadmap as well as with the government and the wider industry on shaping key next steps. Crucial to these is the need for more developed cost benefit analysis – to consider the impacts on saver journeys and the shape of the pensions landscape of the various models that remain in play, prior to further government decisions.”

 Paul Tinslay, a professional trustee at Dalriada Trustees, said: “The good news is that a large proportion of the UK population now have pension savings, whereas previously they didn’t. However, the success of automatic enrolment was always going to generate a few subsequent challenges. The two we currently need to confront are ‘Generation Default’, the perennially unengaged, and difficulties of small DC savings.
 “Small, deferred pension pots can easily be forgotten by members and add to the complexity when taking benefits at retirement. Small pots are also a challenge for the pension providers, with operational costs that would be better invested elsewhere to help drive value for the members. The perennially unengaged cohort mean that scheme-led default consolidation solutions are needed and we could not rely on member-initiated consolidation alone. We will need automated large-scale low-cost transfers and consolidation, with customer journey mapping, cyber and scam protection.
 “The cost of the developments is an important consideration for providers, with single member portals at the provider level and the national Dashboard. Interestingly this means that the consolidated member’s pension pot will need to tell the member where it is, a reverse of the position we have had so far, where the member has needed to tell the pension provider(s) where they are.”


 LCP Senior Consultant Tim Box, stressed the need to make progress, recognising that there is no perfect solution. He said: ““The Working Group has overall made a sensible range of proposals to be further investigated.
 Some such as “same provider/ scheme consolidation” should be relatively “quick wins” to start the ball rolling.

 The solutions potentially having much greater impact such as member exchange, default consolidator and automatic pot follows member will require more analysis and planning.

 We recognise DWP’s view that there may also be a place for member-led solutions but do strongly endorse the statement that automatic solutions will be necessary to complement these.

 The key point now is for the DWP to press on and keep the momentum going so that the erosion and misplacing of small pots is reduced as quickly as possible. It is vital that at least one of the solutions is implemented as soon as possible – in this case “done is better than perfect”.”

  DWP’s Small Pots Working Group report

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