Member engagement
Likewise, Kate Smith, head of pensions at Aegon, said: “Nearly every job comes with a pension but the UK’s fluid job market and general lack of engagement with pensions means the challenge of small, deferred pension pots is growing fast.
“The government’s preferred solution to address this challenge is to encourage a small number of existing large schemes, specifically master trusts, to apply to become authorised default consolidators, for small pots valued sub £1,000.
“This includes the use of a clearing house or central registry to match small pots to their chosen consolidator or to allocate one, if the member hasn’t selected one.”
She added: “We believe this model is fraught with complexity and cost and believe more consideration should be given to other solutions including ‘pot follows member’. “
Jenkins argued that as an industry, many are underestimating the importance of the dashboard.
For a young person, pensions are one of the few areas growing as an asset and when you add employer contributions and tax relief, “it's a very kind of exponential growth compared to what you are paying for it”, he said.
“I can see a world where younger people with the dashboard actually operational in two or three years time would be quite interested in what they've got in their pension pots.”
However he argued that the cynics will say the dashboard will never do that.
They will state that the dashboard is only about funding and valuing what you've got rather than actually being able to do anything functional.
“It's inconceivable that the dashboard won't develop further functionality,” he said.
“It's only going to build from there and we're not even saying that people necessarily need to be able to execute the transfer, but they can instruct it. If I drag and drop two previous pensions and that's an instruction to those providers to transfer them suddenly that's really simple.”
Jenkins added: “I'm not saying it's the totality of the solution, and will deal with all small pots, but it feels like we're sort of giving up on the idea, almost a little bit too soon."
Transfers
Smith explained that a major barrier to any automated small pots solution is the total scheme cost of making pension transfers, which varies by scheme between £30 and £80, as indicated in the consultation paper.
“Until these costs are eliminated, and truly automated, with no human intervention, and communications fully digitalised, it’s hard to see any small pot solution being achievable or cost-effective,” she said.
“We urge the government and regulators to work with the pension industry to investigate ways to reduce transfer costs before forging ahead with any small pots solution.”
