Defined contribution pensions and small pots on the eve of automatic enrolment
Defined contribution pensions and small pots on the eve of automatic enrolment

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As part of a Co-Investment proposal with the Economic and Social Research Council, the NAPF asked the Institute for Fiscal Studies to carry out analysis of holdings of DC pensions and small pots.

Headline figures from the report are: 

  • There are an estimated 0.7 million employer-provided DC pension funds and 0.5 million individually-arranged pension funds containing less than £5,000 that are no longer being contributed to. Collectively the small retained employer-provided pots under £5,000 are worth £1.4 billion, while the retained individually-arranged pots are worth approximately £0.9 billion.
  • There are an estimated 0.3 million employer-provided DC pension funds and 0.2 million individually-arranged pension funds containing less than £2,000 that are no longer being contributed to. Collectively the small retained employer-provided pots under £2,000 are worth £0.2 billion, while the retained individually-arranged pots are worth approximately £0.1 billion.
  • There is scope for these small pots to be consolidated: many of these small pots are held by individuals who also hold at least one other DC pension pot.
  • If all DC pension pots held  by each individual could be consolidated, the research estimates that the number of retained pots containing less than £5,000 could be reduced from 1.1 million to 0.7 million, and would reduce the number of individuals holding any retained pots worth less than £5,000 by 0.3 million. Similarly the number of retained pots worth less than £2,000 could be reduced from 0.5 million to 0.3 million; this would reduce by 0.2 million the number of people holding retained pots worth less than £2,000.
  • If individuals were able to consolidate all their employer-provided pension pots, the number of such retained pots containing less than £5,000 could be reduced from 0.7 million to 0.5 million. However, the 0.5 million individually-arranged pots containing less than £5,000 would also remain.
  • If individuals were able to consolidate all their employer-provided pension pots, the number of such retained pots containing less than £2,000 could be reduced from 0.3 million to 0.2 million. However, the 0.2 million individually-arranged pots containing less than £2,000 would also remain.