The government announced their new small pensions pot consolidator today, April 24
Brits could see a “£1,000 retirement savings boost” under the government’s new plans to combine small pension pots.
By bringing together small, forgotten about pension pots the government predicts the average worker will see a boost in their retirement savings of around £1,000.
Millions will also be able to track their pension savings more easily due to the creation of a small pensions pot consolidator, announced today, April 24, by the Department for Work and Pensions (DWP).
The government said there are currently 13 million forgotten about small pension pots of £1,000 or less, which is increasing by around one million a year.
But now, under the Pension Schemes Bill, every small pot that a person has will be brought together into one pension scheme that is certified as delivering good value to savers – instead of paying multiple flat charges on scattered savings.
The government said the change will cut costs for savers and make it easier to keep track of their pensions, eventually increasing the pension pot of an average earner by around £1,000.
Minister for Pensions Torsten Bell said: “It’s great news that more people are saving for their retirement. But I want to make pension saving as simple and rewarding as possible.
“There are now more small pension pots in the UK than pensioners – raising costs and hassle for workers trying to track their savings. It also costs the pensions industry hundreds of millions of pounds every year.
“We will automatically bring together people’s small pots into one high performing pension, reducing costs as well as hassle for savers.
“In time this could boost the pension of an average earner by around £1,000 as part of our Plan for Change to put more money in people’s pockets.”
If they want to, individuals will be able to opt out from using the scheme – which is also set to save businesses £225 million a year in unnecessary admin costs.
The announcement of the small pensions pot consolidator follows the work of the Small Pots Delivery Group.
Their findings, aimed at supporting the design and implementation of the new small pots consolidator scheme, include: a Small Pots Data Platform to identify and source the pension pots that could be consolidated, a framework setting out the rules a scheme would need to follow to become a consolidator scheme, and safeguards for savers whose pension pots would be consolidated.
The Pension Schemes Bill, set to be introduced in Parliament later this Spring, is set to boost pension pots by £11,000 and help more than 15 million people.
Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, said: “The accumulation of small pots creates unnecessary cost and complexity for savers and schemes alike.
“The PLSA has worked extensively with industry and the DWP to propose solutions and supports the model being proposed by the Government.
“We look forward to working on delivering the recommendations of the Small Pots Development Group and are pleased the Government is tackling this long-standing issue in the Pension Schemes Bill.”
