Marvin OnumonuPensions UK has published its Small Pots Feasibility Review, following a request from the Department for Work and Pensions (DWP) to look at how to deliver the Government’s chosen multiple default consolidator model.
The review found that an industry-led approach using existing infrastructure would be a feasible and cost-effective way to set up the small pots data platform by 2030.
This would allow schemes and consolidators to link up through agreed data and messaging standards, without the need for a new centralised system.
The report said ongoing industry costs were expected to be much lower than if a central system was built.
The review was based on engagement with schemes across trust-based, contract-based, and hybrid sectors, and involved the DWP, The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) to make sure it matched current laws.
Further work will be needed to sort out technical standards, governance, consumer protections and how to phase the rollout, in line with future legislation, according to the report.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “This Review shows that a practical solution to combine millions of small pension pots is within reach — one that delivers value for members, enables schemes to operate effectively, and ensures policy objectives are met.
“By working together, Government, regulators, and industry can deliver consolidation in a way that is efficient, fair, and beneficial for millions of savers.”
Pensions Minister Torsten Bell, said: “With more small pots than pensioners in the UK, too many people are losing track of their hard-earned savings. This is bad for pension savers and bad for the pensions system.
“I welcome this report which underlines our commitment to working with industry to fix that.
“Alongside progress on dashboards, tackling small pots is a crucial step to help millions of people stay connected to their savings and improve their retirement security.”
REACTION:
Colin Clarke, head of product policy strategy at L&G:
“Addressing the proliferation of small pots is one of many challenges that the industry faces over the coming years and this report highlights that an efficient, cost-effective solution is possible.
“L&G are pleased to have contributed to the review and look forward to continuing to work closely with government, regulators and industry to deliver a framework that helps deliver better retirement outcomes for pension savers.”
Philip Brown, director of policy and public affairs at Nest:
“We’re proud to have been a sponsor of the Feasibility Study and this report is a strong starting point to fix the small pots problem.
“We look forward to the next phase of work which will be to tackle the key questions around regulation, governance, and standards, to make sure the system works smoothly and delivers the best outcomes for savers.”
Lizzy Holliday, director of public affairs and policy at Now:Pensions:
“This Feasibility Report is an important step forward in showing the multiple default consolidator solution for small pots, as outlined in the Penson Schemes Bill, is possible and practical from a technology point of view.
“We thank the reviewers for the pace of work and for outlining areas for further development.
“We look forward to continuing to work with Government and industry in resolving outstanding questions and exploring the implications of the report – including next steps for the critical policy, governance and delivery assessments and decisions that will support a successful implementation.”
Angela Staral, chief operating officer at People’s Partnership, provider of People’s Pension:
“The Small Pots Feasibility Review is an immensely important piece of research, which we are proud to have co-funded.
“The report shows that the automatic consolidation of small, deferred pension pots is viable.
“Now it’s time for government and the wider pensions sector to deliver this reform and resolve the small pots problem in the interests of pension savers and their financial wellbeing in retirement.”
Jamie Fiveash, chief executive of Smart Pension:
“We were delighted to take part in this feasibility study. It’s important the industry learns from the past to shape the best future for our members.
“Only by positively embracing change and working collaboratively across industry, and with Government, will we deliver effective solutions that solve real issues for savers.”
Philip Smith, DC director at TPT Retirement Solutions:
“This crucial review addresses the worrying proliferation in small pots and the resulting challenge people face when trying to track down their different pensions.
“Too many workers’ pensions are getting lost in the current system, preventing them from building a full picture of their future retirement.
“The stark reality is that billions remain unclaimed, inactive or simply lost.
“By setting out a clear plan, industry and government can more effectively collaborate to reduce this fragmentation and empower savers to make informed decisions.
“We’re proud to be a part of the driving force behind this agenda, which could help to put thousands more into the pockets of future pensioners.”
