The UK must do much more to consolidate scattered pots over the coming years as the benefits for savers are massive says MP Frank Field.
In an exclusive interview with PP, Field, who was re-elected chairman of the Work and Pensions Committee (WPC) at the beginning of July, believes consolidation can solve many weaknesses that arise from fragmentation. Successful consolidation can curb issues such as meagre returns on member contributions, nearly untraceable pots and excessive bureaucracy.
Field pointed to the example of Denmark, which has fully funded defined contribution (DC) plans that cover 90% of the workforce.
Field said: "We could be doing a lot more to consolidate pensions so instead of small pots in many places, we can look to countries like Denmark where pensions are 30% better in terms of what savers ultimately get [in retirement].
"If we can push down costs, then it will not be so easy for administrators to nibble away at the value of pots by increasing fees."
Economies of scale from consolidation would also help retrieve some notion of protection for savers, which Field believes has been lost over the time.
"We need to recreate that collective protection - which has been lost - by remodelling DC pensions to spread risk, reduce costs and improve what individuals get out of the system," he added.
The issues the WPC will look at and the agenda it will set during this period of parliament will mainly build on the work from the last one.
"We are going to have a very active committee on pensions in terms of shining a light on those worst employers like Sir Philip Green who we feel have not done their duty. We are going to be on them and expose their behaviour to the public's gaze."
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