Small pension pots: “Government needs to ‘get off the fence and take action’” – Steve Webb, LCP

by | Jan 30, 2023

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Today DWP has published a ‘call for evidence’ on potential solutions to the problem of small deferred pension pots. 

The two lead options are a ‘default consolidator’ where each small deferred pot would be automatically transferred to a single scheme, or ‘pot follows member’, where deferred pots go with the worker and are added to their new active pot.

Today’s publication comes after a series of attempts to resolve this issue including:

  • The 2014 Pensions Act, which included primary legislation for a ‘pot follows member’ system; this was not implemented after the 2015 General Election;
  • A DWP led ‘small pots working group’ was set up in September 2020;
  • In March 2021 a ‘small pots industry co-ordination group’ was set up at the instigation of the Minister, and led by the ABI and the PLSA;

Today’s call for evidence says that once replies have been received, DWP will consider its next steps and that this will be followed by a further round of consultation.


ONS statistics on Funded Occupational Pension schemes suggest that the total number of deferred pension pots is rising by around 2 million per year, and most of these will be for relatively small amounts.

Commenting, LCP partner Steve Webb said:“Whilst it is welcome that the Government is seeking to address the small pots issue, it is time for the DWP to get off the fence and take action.  It has been obvious since the start of automatic enrolment that small pots would be an issue which is why the 2014 Pensions Act provided for a pot-follows-member solution.  Unfortunately this was not seen through and, nearly a decade later, we are still at the stage of ‘calls for evidence’ followed by further consultation.  What is needed is for someone to take a decision and move ahead with implementation.  

The ‘pot follows member’ option was always an attractive one, meaning that member pensions would be consolidated with their current provider, possibly on very favourable terms.  The creation of a pensions dashboard infrastructure which links together all of an individual’s pensions would make a pot follows member solution much easier, and there is now no reason not to move ahead.  It is time to move on from ‘analysis paralysis’ to action”.


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