Recently, the Department for Work and Pensions (DWP) announced the creation of a small pots working group, which the ABI was happy to be asked to participate in.

Small pots are not just an efficiency and costs issue for the pensions industry but also for savers, many of whom struggle to keep connected with smaller pots and lose out on their own savings in retirement.

The ABI believes a range of measures are needed to fully address the problem of small pots – while default options such as automatic transfers or a default consolidator may be needed there should also be a strong element of personal choice by customers.

Imperative for any solution though is for government to prioritise delivery of commercial and non-commercial pensions dashboards to spur pension scheme members to consolidate their pots.

As the DWP’s recent charge cap consultation said, there are issues with all types of charging structures when it comes to small pots.

While they can be low, annual management charges have an inherent cross subsidy, while flat-fee charging has the potential to erode pot sizes.

The ABI will continue to work towards a future where all pension schemes provide value for members and good outcomes.

We will continue to urge the government and the FCA to have a joined-up approach when developing future policy and regulation on small pots in automatic enrolment pensions to ensure good outcomes for consumers.

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