The Pensions Data Project, an initiative led by five major UK master trusts, L&G, Nest, now:pensions, People’s Pension and Smart Pension, has published the final report of its Private Beta phase, revealing over 2 million small pots across the five providers could be consolidated if all five became default consolidators under current government plans.
Coordinated by The Pensions Policy Institute (PPI), using data consolidated and analysed by PwC, the report, covering almost half the UK working population, also shows the gender and age disparities in savings, with the value of individual pots underscoring the risks of fragmentation and inadequacy.
The findings come as the government’s Pension Schemes Bill, which would consolidate individuals’ small DC pension pots through multiple default consolidators, faces parliamentary scrutiny. The Pensions Commission, announced by the government in July, is also examining adequacy levels within the pensions system.
The Pensions Data Project was established to fill a critical evidence gap in the UK pensions landscape by creating the first large-scale, longitudinal dataset of individual retirement savings across multiple providers. Currently in the UK there is no central longitudinal research database of people’s total retirement savings. This exists in other countries (such as the USA(5)) and is a powerful tool for evidencing how individual citizens’ retirement savings, aggregated across their different schemes and providers, are evolving over time.
The completion of the Private Beta phase of the project has demonstrated that combining data securely across providers is feasible – alongside the importance of cross-industry collaboration to improve outcomes for savers – laying a foundation for the next phase of the project to build a comprehensive dataset of UK retirement savings.
Further key findings from the report are:
• While the five master trusts cover over 16 million unique individuals—approximately half the UK’s working population—most pots remain small.
• In 2022/23, over half of all pots were worth less than £1,000, and seven in ten less than £2,500.
• 3.6 million members (who have multiple pots) could visit the Pensions Dashboard to view all of their pension savings in one place, on the expectation that the average number of pots members of the five providers hold, 1.3, will rise when pots from other types of pension schemes and funds are also considered.
• Total assets have tripled in four years to £64 billion, with mean values more than doubling.
• Men, older members, and those in certain regions typically have higher balances, while women, younger savers, and lower-income areas lag behind.
• Consolidation modelling suggests that merging pots could lift average balances by more than 25%, reduce the number of very small pots, and strengthen member outcomes.
To download a copy of the report please click here
Nicky Day, Project Lead at The Pensions Policy Institute and co-author of the report, said: “We are proud to publish the final report of the Private Beta phase for The Pensions Data Project, demonstrating the powerful insights that can be delivered when the industry collaborates to deliver better outcomes for savers. This research proves combining data securely across providers is possible, laying the groundwork for the wider sector to now work together to fill a critical evidence gap in the UK pension system. When the sector and policymakers are better informed, we can maximise retirement savings for everyone.”
Phil Anthony, Senior Manager at PwC, commented: “I am proud to have led the PwC team who supported the Pensions Policy Institute in this important project on small pots consolidation. PwC's pensions expertise and data analytics capability have helped demonstrate how collaboration across the industry can help drive meaningful change, creating a stronger evidence base to inform policy and improve outcomes for savers."
Richard Notley, Senior Analyst at Nest Corporation, commented: “This research highlights the growing issue of small pots across the DC workplace pension industry. By securely combining data with other providers in this study, Nest has shown its commitment to developing solutions that help workers make the most of their retirement savings and secure a more stable financial future.”
Lizzy Holliday, Director of Public Affairs and Policy at now:pensions, commented: “This report provides timely analysis and unique insights into the characteristics and pot sizes of members across the five providers – including key patterns over time, across gender, age and geography. It demonstrates the significant growth of pensions savings following the completion of the full implementation of Automatic Enrolment, and also clearly evidences the ongoing challenges regarding adequacy, equality and prevalence of multiple small deferred pots. These findings provide a rich source of data and evidence to inform key policy debates, solutions and delivery – including those currently progressing via the Pension Schemes Bill and the Pensions Commission.”
Tim Gosling, Head of Policy at People’s Partnership, commented: "Participating in this project has shown us the power of merging data sets to improve our understanding of shared pension problems, which will benefit millions of savers. What we’ve learned from this collaboration so far is that this approach can shed new light on the small pots problem. But, future secure merging of pension provider datasets with national statistics could provide much deeper insight into more complex policy problems. We may learn much more about how people work and save for retirement.”
Jamie Fiveash, CEO at Smart Pension, commented: “We are proud to have been part of this innovative project, which will help to inform pensions policy such as resolving the number of small and dormant pots which continue to grow significantly. It is essential that policymakers and providers have the tools and data to enable them to make informed decisions.”
Colin Clarke, Head of Product Policy Strategy, Workplace Savings at L&G, added: “We’re pleased to have contributed to this report. Tackling small pots remains one of the biggest challenges facing our industry, especially with the growth of DC pensions. Addressing this issue is crucial, as the proliferation of small pots and a lack of member engagement can be a real barrier to achieving adequate retirement savings. That’s why it’s vital we provide clear guidance and targeted support to help members make better decisions for their future. Ultimately, our focus must always be on improving outcomes, ensuring every saver has the opportunity for a more secure retirement.”
|
