Guest comment: The growing small pension pots issue

Since the rollout of programme in 2012, auto-enrolment (AE) has seen 10 million staff automatically enrolled by 1.6 million employers.

It’s typical to hold more than one job for life. For some, brief periods with different employers may be the norm. And it’s these short stints of employment that are the primary driver behind a growth in deferred pension pots.

These small pots pose a risk to saver outcomes as they are vulnerable to becoming lost or left deferred and slowly eroded due to scheme charges.

This means savers may not experience the best possible outcome.

The Department for Work and Pensions’ research estimates AE could create about 50 million dormant pension pots by 2050 – it’s clear a solution is needed.

Savers, whatever their employment pattern, should see their pension savings working for them throughout their working life.

That’s why I’m pleased to see industry working together with government and regulators on this and welcome the publication of the small pots working group’s report on 17 December 2020.

TPR’s strategic goal for members of defined contribution (DC) schemes is to see savers get good value for their money. This means costs and charges must be kept at a reasonable level.

We look forward to continuing to work with industry and the government to ensure any solutions developed will be in the best interest of all DC members and will deliver improvements in savers’ outcomes.

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