Policy submission

DWP call for evidence on Addressing the challenge of deferred small pots - Which? response

The existence of millions of small (low value) deferred pots adds cost to the pension system which will likely lead to higher charges and widespread cross-subsidisation between scheme members. The proliferation of small deferred pots also makes it harder for members to keep track of their savings and to make good decisions about their savings. This response sets out Which?'s current position on how best to tackle this growing problem for the benefit of UK pension savers
2 min read
Advocacy Team
  • Which? welcomes this call for evidence and the government’s continued efforts to find a solution for the problem of small deferred pots. As is clearly set out in the call for evidence and elsewhere, this is an issue resulting in worse outcomes for pension savers. The already enormous growth in small, deferred pots has added inefficiency to the system, increasing costs that will have likely fed through into higher charges and led to widespread cross-subsidisation between scheme members. The proliferation of small deferred pots also makes it harder for members to keep track of their savings and to make good decisions about how much to save and when to withdraw their savings.
  • Which? has been pleased to be able to support the process of finding an appropriate policy response to this issue through our engagement with the DWP-chaired Small Pots Working Group and the ABI and the Pensions and Lifetime Savings Association (PLSA) jointly convened the Small Pots Cross-Industry Coordination Group. We were satisfied with the progress made by the Coordination Group, which helped to advance understanding of the viable solutions and identified a number of key member protections that will need to be included in the design of an auto-consolidation process.
  • A clear outcome from the Coordination Group was a recognition that there will need to be legislation to implement an effective, whole-of-market process for small pot automatic consolidation, so we are pleased that DWP is now seeking to build on the work of the Coordination Group and to move us closer to finding the right solution for this problem.
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