Two fifths (40 per cent) of UK savers with a pension in a major master trust have additional savings with another master trust, research by the Pensions Data Project has revealed, raising concerns over pension fragmentation and the need for small pots consolidation.

The research found that there is a "significant chance" when a provider sees a new member that they are already on the books elsewhere, suggesting that many savers could be in line for being some part of consolidation.

The study aimed to understand how UK workers retirement savings are spread across multiple providers, exploring the potential for matching savers’ data, in future initiatives such as pensions dashboards and small pot aggregation.

This revealed that when combining data across providers, around 85 per cent of good matches were found to be exact matches based on national insurance (NI) number, surname, and date of birth, suggesting consistency across providers.

However, it also showed that there will be many partial matches that require further verifications to be able to assume that a match is reliable, as 47 per cent of potential matches (around 10 million cases in 2022) were deemed “unacceptable” due to insufficiently reliable data, mainly matching only on surname and date of birth.

Meanwhile, less than 600,000 records (6 per cent of matches in 2022) relied solely on NI number, indicating NI numbers could be used as a “unique” identifier in other projects.
The research found that there is a “significant” chance than when a provider sees a new member, they already have an account with another provider.

In addition to this, almost all of the data (98 per cent) provided by the five master trusts contained valid identifiers, suggesting high data accuracy across providers.

The research also pointed out that as of 2024, there were 27.5 million deferred/frozen pension pots, highlighting the scale of pension fragmentation.

Commenting on the research, People’s Partnership head of policy, Tim Gosling, said: “Better data about the UK pensions system will lead to better decision making by pension providers and policymakers and better outcomes for the savers the pensions system is there to serve."

He added that combining the data from five pension providers has created a “unique” data set “sheds new light” on the success of automatic enrolment and will help resolve long-standing problems, like the consolidation of small, deferred pots.

Adding to this, Now Pensions director of defined contribution (DC) platform, David Bird, noted that bringing together such a “large” data set across providers allows us to draw “new key” insights into the sector which we have not been able to do before.

“This has the potential to improve member outcomes and experiences, as well as inform the current policy debates. We look forward to reviewing the findings in more detail,” Bird said.

Nest Insight analysis director, Matthew Blakstad, commented that up to now, it has been “hard” to get a joined-up picture of an individual’s total retirement savings and therefore said this report helps fill the gap in knowledge and unlocks important new insights.

The Pensions Data Project is an initiative led by five of the largest UK master trusts, Legal & General, Nest Insight, Now Pensions, People’s Partnership and Smart Pension and coordinated by the Pensions Policy Institute.

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