A new pensions industry small pots working group has been established by the Pensions and Lifetime Savings Association (PLSA) and the Association of British Insurers (ABI).

The Small Pots Co-ordination Group, which will take forward the recommendations of the Department for Work and Pensions (DWP) chaired Small Pension Pots Working Group, is comprised of experts from a range of pension providers, industry bodies and stakeholders.

These members include Pensions Administration Standards Association chair, Kim Gubler, ABI assistant director and head of long-term savings policy, Rob Yuille, PLSA deputy director, policy, Joe Dabrowski, and Capital Cranfield Trustees professional trustee, Andy Cheseldine, who will serve as chair of the new working group.

The establishing of this group came at the recommendation of the DWP’s own working group in December.

The group will direct relevant work across the industry and will focus on the administration processes that could underpin a future long-term consolidation model in the interests of savers, as well as examining existing data-matching requirements, common data standards and the requirements for a low-cost transfer process for mass consolidation.

In its announcement, the PLSA also confirmed that the group will publish a progress report in the summer.

Pensions Minister Guy Opperman 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.”

Explaining the need for the new working group, PLSA explained that the number of small deferred pots in the pension system had been increasing since the introduction of automatic enrolment in 2012, noting that the small pots are often the result of people switching jobs and then losing track of retirement savings.

These small pots can be eroded significantly by costs and charges over time, while having multiple pots also introduces complexity for savers and increases the possibility of them losing track of their savings.

They can also problematic for providers, as smaller pots are less efficient to administer.

Cheseldine said: “To an extent, auto-enrolment has been a victim of its own success, with members building up pension pots even in short term jobs. We need to find a consistent and sustainable way to protect these members from the costs and complexity of multiple pension accounts.”

Dabrowski commented: “The Small Pots Co-ordination Group gathers experts from across different segments of the pension industry to tackle the small pots problem in the interests of savers. It is important that the systemic solutions are found across the sector, and we address the areas of greatest need quickly, before it grows to become a much larger problem over time.”

ABI head of retirement savings, Rob Yuille, added: “More can be done to help customers with fragmented pension pots get the most out of their savings. Learning from the industry’s experience with transfers and pensions dashboards, we look forward to working collaboratively to identify what is needed to tackle this challenge across the whole automatic enrolment market.”

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