The Treasury’s call for evidence on small pension pots is “deeply frustrating”, according to former Pensions Minister Steve Webb, a partner at LCP.
He said: “The Government needs to get off the fence and take action.”
Pensions Minister Laura Trott announced a major pensions consultation yesterday, along with a proposed new ‘value for money’ framework and a review of collective defined contribution schemes.
The aim, she said, was to create “fairer, more predictable, and better-run pensions.”
But Mr Webb pointed out that it was nearly ten years since an Act of Parliament paved the way for a solution to the small pots conundrum, so “it is deeply frustrating that we now have another call for evidence which will – incredibly – then be followed by further consultation.”
The new consultation comes after a series of attempts to resolve the issue including:
- The 2014 Pensions Act, which included primary legislation for a ‘pot follows member’ system; it was not implemented after the 2015 general election;
- A DWP led ‘small pots working group’ was set up in September 2020;
- In March 2021 a ‘small pots industry co-ordination group’ was set up at the instigation of the Minister, and led by the ABI and the PLSA.
Mr Webb said: “It has been obvious since the start of automatic enrolment that small pots would be an issue which is why the 2014 Pensions Act provided for a pot-follows-member solution.
“Unfortunately this was not seen through and, nearly a decade later, we are still at the stage of ‘calls for evidence’ followed by further consultation. What is needed is for someone to take a decision and move ahead with implementation,” he said.
Alyshia Harrington-Clark, head of DC, master trusts and lifetime saving at the PLSA warned that if the government doesn’t take action, it “could lead to more than 20 million small pots by the end of the decade.”
She said: “Industry has and will continue to work hard to support Government efforts to resolve to these complex problems for the future of consolidating small pots and implement mass market automatic enrolment solutions.”
Dr Yvonne Braun, director of policy, long-term savings, health & protection, ABI welcomed the new consultation.
She said: “We’re pleased the Government recognises the need to introduce legislation to solve the small pots problem.
“To materially reduce the millions of small pots, a whole of market automatic transfer model is likely to be required, and legislation will be crucial to compel providers to take part in the solution.”
