The Work and Pensions Committee (WPC) has asked the industry for “workable solutions” to address the problem of problem of proliferating small pension pots.
In a letter sent to the industry today - seen by Professional Pensions - WPC chairman Stephen Timms noted the number of very small defined contribution pension pots had increased since the introduction of auto-enrolment. He added that the rise in the number of small pots had a substantial impact on costs and fees, particularly among those with small posts in schemes which levy flat fees on members.
Timms noted this issue had been raised in the Department for Work and Pensions' (DWP) call for evidence reviewing the default fund charge cap and standardised cost disclosure for pension schemes published in June.
And he urged those responding the DWP's call to put forward solutions for consolidating very small pension pots - also asking them to send these ideas to the WPC ahead of it conducting further work into this issue early next year.
Timms added: "Consolidating small pots might form a major part of reducing the total cost of saving to individuals, whilst enabling a sustainable, competitive market for lower paid employees."
Professional Pensions has spoken to a number of organisations that have received the letter - including master trust Smart Pension.
The master trust's director of policy, Darren Philp, said the intervention by the WPC was "welcome".
He said: "This is an important issue that needs resolving. It makes no sense for members to have small pots with different providers as this just leads to lost pension pots and unnecessary cost and hassle.
"Pension dashboards will help a bit, but we do need action to make it easier and more cost effective to consolidate small pots, and this is becoming ever more pressing. We hope that the positive involvement of the select committee will help build the evidence base and consider potential solutions that can be taken forward by government, regulators and the industry."
Goddard Perry managing director Steve Goddard also welcomed the focus on the issue of small pots - noting there were some simple steps that could be taken to help ease the issue for master trusts, including waiving the general levy for members with small pots, which can be as high as £2.88 per member per year, and ensuring regulatory reserving requirements also accommodated the concept of thousands of small pots.
