In the absence of action from the current government, the industry needs to step up to solve the growing problem of small pension pots, according to the Tax Incentivised Savings Association’s policy strategy director.
Speaking to FTAdviser, Adrian Boulding warned this was a “serious issue that will get worse rapidly”, predicting the government’s previous prediction that 50m pension pots could be stranded by 2050 could be multiplied by 10.
“We have brought the high-turnover sector of the workforce into pensions for the first time via auto-enrolment, which is great, but it does mean that they’ll be collecting multiple small pots up over a lifetime.
“Unfortunately it appears that the DWP has [dropped] tools for the moment, as an outcome of austerity and more pressure on government departments, so I think the industry must step up.”
With his other new hat on, that of principal consultant at software firm Dunstan Thomas, Mr Boulding explained that it has prototype software which enables savers to see all their schemes in one place, potentially lessening the communications duplication for providers.
“This would require a coalition of the willing among the bigger providers, not necessarily all through this one system, but at least with systems capable of talking to each other.”
Mr Boulding gave his backing for the ‘pot-follows-member’ approach to dealing with multiple small pensions that was adopted by former pensions minister Steve Webb under the coalition government, after a consultation on the issue which left the industry divided.
The system would mean any workplace pension pot of less than £10,000 automatically moves along with a person’s change in job, and at the end of last year Mr Webb stated it was due to take effect from October 2016.
In February this year, the Department for Work and Pensions unveiled how automated transfers will work in practice, detailing a ‘network’ of registers for pension schemes to use when moving pots through a ‘federated model’.
However, in the summer, recently-appointed pensions minister Ros Altmann told FTAdviser she was working through a “whole range of issues” that were started by Mr Webb, including pot-follows-member, pensions dashboards, combined pension statements and defined ambition.
A statement from the DWP read: “Baroness Altmann has set out her immediate priorities, which include ensuring the continued smooth roll-out of AE to smaller employers and improving public understanding of state pension reform.
“The detail and timing of the government’s next steps on automatic transfers remain under consideration and will be announced in due course.”
Tom McPhail, Hargreaves Lansdown’s head of pensions research, argued that the pot-follows-member system needs a rethink.
“The critical question is to make sure that whatever solution is applied to the problem of small pots, it is consistent with the pension freedoms,” he commented.
Last week Robert DeDominicis, chief executive of platform engine GBST Wealth Management, said advisers wanting to know what the future holds for pension freedoms should look to his birthplace of Australia.