The IFS are telling people 10 things they already have – which annoys them
The number of deferred small private pension pots is large and growing.
The proliferation of these deferred small pension pots is burdensome for savers and pension providers.
Lower earners and women are particularly likely to accumulate small pension pots.
The status quo is not fit for purpose. We judge there is a strong case for deferred small pension pots to be consolidated by default
Individuals who have more than one pot with the same pension provider should have these pots automatically consolidated together
Only deferred pots below £1,000 should be automatically consolidated initially, but this limit should ideally be raised over time and should also, in the long run, be subject to regular and frequent increases to avoid it falling behind inflation.
Another key question for implementation is which pot the deferred small pots should, by default, be consolidated with
The choice between default consolidator and pot follows member interacts with the size limit for deferred pots. There are definitely advantages to the pot follows member approach, but the preferred policy will depend on the weight policymakers put on ensuring all individuals end up with a single pot by retirement as well as the government’s aims for the future structure of the DC market.
We judge that member choice and lifetime provider solutions should only be considered after fully implementing policies to consolidate deferred small pots automatically.
We are back where we have been so many times before. This problem of people having too many small pots has been discussed at great length and has resulted in nothing happening. Poor old Andrew Cheseldine , Steve Webb and lots of other people went barmy about this for a long time – to no effect.
What we have instead of solutions is something called “pension dashboard” which will allow ordinary people to see all their pots with money that buy a pension, on a single screen.
We hope we will have access to this dashboard next year and we hope that people will be able to move pots together a little bit easier as they know what they’ve got and where the pots are.
People may get sufficiently enamoured of having all their pots in one place that they will choose the pot they like most (my bet is it will be chosen on the basis of being treated well in many cases). They will consolidate to this and nobody will stop them.
I do not think that Government will try to legislate to make consolidation happen because Government’s know that the current situation is not causing them problems and moving money around will.
I am sorry to berate IFS but they and PPI are very good at providing us with reports on the basis of what is wrong but unable to put things right so we end up in a better place.
The report is 28 pages long, has a lot of good research and it tells us what we all knew, that we are getting no problems with all this.
