Speaking at a Work and Pensions Committee (WPC) evidence session this morning (23 March), Age UK policy officer Chris Brooks called on the government to take more action on small jars.
‘The Department for Work and Pensions was looking at small pots and what to do but it seems to have stalled recently,’ he said. “They need to take that back and come up with some sort of solution because that’s part of the process.”
Brooks reiterated that there are too many tiny defined contribution (DC) pots – a problem that continues to prevent people from effectively saving for later, which is the main focus of the evidence appeal of the WPC today.
The industry co-ordinating group tasked with tackling the problem of the large number of small deferred pension pots confirmed it had enough evidence to start finding practical solutions last September.
The potty coordination group, which is convened by the Pensions and Lifetime Savings Association and the Association of British Insurers, published its first progress report six months ago, but has yet to publicly present any solutions to this problem.
“Some people may say the dashboard can solve this problem, but I’m skeptical about it,” Brooks added. “If you have a lot of potties because you’ve had a lot of jobs or moved around a lot in your career, then the scorecard won’t be in a good position to help you.”
A “pot-follows-member” solution – employed in several overseas countries where the majority of pension funds sit in DC funds – would be most appropriate, Brooks suggested.
“I would really encourage the government to continue working to resolve this issue,” he concluded.
Research from the Pensions Policy Institute (PPI) estimates that there will be around 27million potties by 2035. Ten million potties currently cost around £130million each year in administration, the PPI said, with the 15-year bill for the service of an additional 17 million by 2035 is expected to cost half a billion pounds.