The small pension pots working group has had its first meeting on Wednesday, with a team of experts appointed to explore solutions for the issues faced by auto-enrolment savers and schemes.
The Small Pots Co-ordination Group, formed on recommendation from the Department for Work and Pensions, was created by the Pensions and Lifetime Savings Association and the Association of British Insurers, and comprises experts from a range of pension providers, industry bodies and stakeholders.
The group will direct work across the industry, "focusing on the administration processes that will underpin a future long-term consolidation model in the interests of savers”.
It will examine existing data-matching requirements, common data standards and the requirements for a low-cost transfer process for mass consolidation, with a progress report expected to be published in the summer.
The first meeting, which took place on Wednesday, was attended by the minister for pensions and financial inclusion, Guy Opperman.
He said: “Given the risks that the growth of deferred small pots presents to savers and their ability to plan for retirement, it is imperative that we find a solution.
“I'm very pleased that representatives from across the industry are now convening to consider ways to combat this, and their progress reports will provide valuable insight for tackling this issue together.”
Small pots present severe challenges to master trusts, and to the success of auto-enrolment as a whole.
Their charges and administrative fees has long been a problem for members, who in some cases have seen their pension depleted over the course of their careers, at a cost to the individual of hundreds of pounds of savings.
The government announced in January that it would introduce a ban on the charging of flat fees on pension pots under £100, in an attempt to stop their erosion by charges and administration costs.
There are currently 8m deferred pension pots and 8m active pots in master trust schemes, and many more in other defined contribution schemes, the industry bodies said.
It is estimated that, for master trusts alone, this could increase to 27m deferred pensions and 9m active pots by 2035 without intervention, they added.
Andy Cheseldine, professional trustee at Capital Cranfield Trustees will chair the group, which includes representatives from DWP, PLSA, ABI, the Chartered Institute for Payroll and Pension Professionals and the Pensions Policy Institute, alongside professionals from master trusts such as Nest, The People’s Pension and Now Pensions and providers such as Aviva and Royal London, among others.
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