Small pots, big opportunities? – NAPF event 17th May 2012
On 17 May, the NAPF in conjunction with the Institute for Fiscal Studies held an event discussing the prevalence of small pots, issues around transfers and potential policy solutions.
Around 40 delegates including pension schemes, providers and researchers from Government, think tanks and interest groups first heard a presentation about the prevalence of small pots, the characteristics of those who hold small pots and the scope for reducing the number of small pots by transferring them. Rowena Crawford from the IFS showed that if all workplace DC pots with less than £5,000 which are no longer contributed to were consolidated, we would see a reduction of 30% in small pots – a fall from 700,000 to 500,000.
But how easy is it to transfer? Andrew Wood from RS Consulting presented research originally conducted for the Department for Work and Pensions that showed that the average transfer took around 8-9 calendar days in 2011. This is a huge improvement on the 50 odd days it took before the introduction of a web platform to facilitate transfers (the ‘options platform’). However, if the individual saver needs to keep track of half a dozen pension pots and their documentation and initiate the transfer, transfers are unlikely to increase in numbers, even if the process is becoming easier.
Richard Wilson from the NAPF then discussed the different options for automating transfers. In a poll of NAPF members, around 5 in 10 respondents were in favour of an ‘aggregator model’, where all small pots an individual holds are gathered in one large one. Only about 3 in 10 respondents were in favour of a ‘pot follows member’ approach. 8 in 10 respondents saw a role for NEST in addressing the issues around small pots.
Jamie Fiveash completed the discussion by showing what his scheme, B&CE’s People’s Pension, is doing to address the issue of small pots. He argued for a removal of short service refunds, and for allowing trustees or providers to initiate the transfer. He emphasised the problems around keeping track of members, and suggested the introduction of a central register, where employees could see all the occupational pensions they hold.