Millions of people will be saving for their retirement due to automatic enrolment. But some of these will only be contributing small amounts and may change jobs frequently, meaning that they move between pension schemes.
Estimates suggest that without action, there could be over 50 million dormant pension pots by 2050. There is a risk that such small pots could get lost over the course of an individual’s working life and could prove challenging to convert into a retirement income.
The Pensions and Lifetime Savings Association supports efforts to consolidate individuals’ small pots in one place, so that people have a small number of large pots when they come to retire. However, we believe that current proposals for a ‘pot follows member’ system of transfers are flawed and need to be re-examined. This approach threatens to be detrimental to both savers and the industry, potentially eroding the value of members’ pots by transferring savings to badly managed schemes and proving disproportionately complex for schemes to implement.
Whilst agreeing with the objectives outlined by Government, the Pensions and Lifetime Savings Association will be making the case for fresh a solution that works for both savers and schemes in the future.