On the go: The small pension pots working group had its first meeting on Wednesday, with a team of experts appointed to propose solutions to the current issues caused to auto-enrolment savers and schemes.
The Small Pots Co-ordination Group, stemming from a recommendation from the Department for Work and Pensions, has been created by the Pensions and Lifetime Savings Association and the Association of British Insurers, and comprises experts from a range of pension providers, industry bodies and stakeholders.
The government announced in January that it would introduce a ban on charging flat fees on pension pots under £100, in an attempt to stop their erosion by charges and administration costs.
Small pots are thought to present severe challenges to master trusts and to the success of auto-enrolment as a whole.
Their depletion by charges and administrative fees has long been a serious problem for members, who can in some cases see them eroded away entirely over the course of their careers, at a cost to the individual of hundreds of pounds in savings.
There are currently more than 8m deferred pension pots and 8m active pots in master trust schemes, with many more in other defined contribution schemes, the group said.
It is estimated that, in master trusts alone, this could increase to around 27m deferred pension pots and 9m active pots by 2035 without intervention, it added.
The Small Pots Co-ordination Group will “direct relevant work across the industry, focusing on the administration processes that will underpin a future long-term consolidation model in the interests of savers”.
It will examine existing data-matching requirements, common data standards and the requirements for a low-cost transfer process for mass consolidation, with a progress report expected to be published in the summer.
Andy Cheseldine, professional trustee at Capital Cranfield Trustees, will chair the group, which includes representatives from DWP, PLSA, ABI, the Chartered Institute for Payroll and Pension Professionals and the Pensions Policy Institute, alongside professionals from master trusts such as Nest, The People’s Pension and Now Pensions and providers such as Aviva and Royal London, among others.
The first meeting was attended by the minister for pensions and financial inclusion, Guy Opperman.
He said: “Given the risks that the growth of deferred small pots presents to savers and their ability to plan for retirement, it is imperative that we find a solution.
“I'm very pleased that representatives from across the industry are now convening to consider ways to combat this, and their progress reports will provide valuable insight for tackling this issue together.”
