Today, the UK government unveiled reforms aimed at making it easier for workers to manage their pensions by consolidating small pension pots. Currently, there are 13 million pension pots worth £1,000 or less, with this number growing by around one million annually. These small pots create unnecessary administrative costs and can reduce returns for savers due to flat fees.
The new initiative will bring these small pots together into a single pension scheme, certified to deliver good value for savers. Workers will have the option to opt out, and the plan is expected to increase the pension savings of the average worker by around £1,000. The move is also expected to save businesses £225 million annually in administrative costs.
The reforms are part of the Pension Schemes Bill, which is set to encourage more investment in the pensions industry and help boost retirement savings. The new system aims to reduce complexity and costs for savers while contributing to the government’s broader growth mission.
Experts, including representatives from the Pensions and Lifetime Savings Association (PLSA) and Which?, have expressed support for the changes, which aim to simplify pension saving and ensure people’s pensions grow more effectively.
Gaucho Rasmussen, Executive Director of Regulatory Compliance at The Pensions Regulator (tPR), also welcomed the government’s plans for a small pension pot consolidator.