The Small Pots Co-ordination Group (SPCG), established by the Pensions and Lifetime Savings Association (PLSA) and the Association of British Insurers (ABI), has outlined three solutions to reduce the number of deferred small pots and stop their continued proliferation in the future.
In a report by the PLSA titled ‘Small Pots Cross Industry Co-Ordination Group’, the group agreed that the Pot follows Member (PfM), Multiple Default Consolidators, and Member Exchange models are all potential solutions for the small pots problem.
The SPCG has discredited a single default consolidator during the most recent phase of the group’s activities and said that a combination of models can be the most efficient approach to eliminate the most inactive small pots, as it is in Australia.
The report also noted that more research was required to determine how much the models still being considered might be expected to reduce the overall number of small pots and how much these models might affect the long-term financial viability of the automatic enrolment market.
NOW: Pensions CEO Patrick Luthi says: “By the end of this year there is likely to be more than 11 million small, deferred pension pots within the industry.
“It is essential that an automatic consolidation solution is found for those savers who change jobs frequently and leave their small pots behind. It’s important that these savers are at the heart of the solution, so their pensions savings are combined in a place where they can continue to grow for their future retirement.
“We are pleased to be part of the Small Pots Co-ordination Group which is looking to agree upon an industry-wide solution to the small pots problem. As reflected in the new Spring 2022 report that was published yesterday, we at NOW: Pensions along with the industry group have been working hard to find a long term sustainable solution that ensures providers do not face additional administrative burden and that all savers get the best possible retirement pot.”
