Lost treasure: dormant DC pension pots
By Dan Bowman
The advent of auto-enrolment will see millions of people in the UK save into a workplace pension for the first time. While this drive to help people build up sufficient retirement income is a step in the right direction for the private pension system, it does carry some inherent risks. Every time someone changes job there is a risk they will leave behind a pension pot in the previous employer’s pension scheme and forget about it. As the number of small defined-contribution (DC) pension pots is set to increase significantly as a result of auto-enrolment, forgotten pots could result in insufficient retirement savings. The government estimates that, without further reform, auto-enrolment will create up to 50 million dormant pots by 2050.
This does not sit well with the government’s commitment to support people in building up sufficient retirement income. So it was no surprise when it consulted in 2011 on options to create an automatic transfer system to help pension savers keep track of small DC pots. Since then it has been working with the pensions industry to find a way to make this system work. Further details were recently provided in its April 2013 paper entitled Automatic transfers: consolidating pensions savings…
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