Tom’s discussion is well worth a watch , not least for the various interventions from an engaged audience.
Interesting session today. We always enjoy listening to your speakers and the diverse opinions and views from across the pension sector. @DavidRJTaylorUK and @ShalinBhagwan are really looking forward to joining you next week.
— Pension Protection Fund (@PPF) September 26, 2023
The position he adopts is simple. He agrees that the existing stock of small pots should be combined through “default consolidators” as proposed by the Government in one of the Mansion House Consultations.
He considers a “pot for life” solution could be implemented going forward. This would work for most people as most people have pots that deliver value for money.
The key dependency is payroll , which would either need to clear to the pot of choice. Payroll has proved itself sympathetic to the needs of savers but employers have not shown any appetite to pay for extra payroll functionality or service, to ensure the clearing worked.
This runs into a fundamental problem with auto-enrolment. Employer support has been on a “compliance-only” basis. Most employers do the bare minimum to choose a pension , assess contributions and pay money over to a chosen provider.
The numbers of employers considering a workplace pension an employee benefit is small relative to employers who simply comply. Issues such as salary sacrifice are typically only business justified if there is a shared benefit between employer and staff. Offering a service to staff which allowed money to paid into the pension of choice does not get a tick from most employers.
While there is clearly “something in it” for providers, who find small pots a growing problem, there has been a reluctance from them to build the APIs to payroll software to allow a pot for life system to work. Practitioners such as System Sync, speaking at the event, explained that without mandation, it was hard to see progress on the scale needed to put an end to the small pot problem.
With advocates such as Tom McPhail, it is unlikely that the “pot follows member” initiative will go away, but the Pension PlayPen coffee morning showed that there is currently insufficient will among any of the stakeholders to make this happen.