Dealing with DC pension pots — options for schemes and members

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Dormant pots carry a significant administration and cost burden for pension schemes. The bad news is that the number of dormant pots that schemes have to manage could increase quickly once the power to make short service refunds from defined-contribution (DC) schemes is abolished (expected in 2014). Even when the government’s proposed automatic transfer system is in place, it will (initially at least) apply only to pots created under auto-enrolment, not to existing legacy pots.

What can administrators do to limit the burden of dormant pots? From a cost and data maintenance perspective, the ideal is to keep the number of dormant pots being created and maintained to a minimum. It’s also in members’ interests to engage with, and make active decisions about, their pension saving, rather than ignoring — and potentially losing track of — DC pots from former employment.

Allen & Overy has set out some possible options that could help schemes and members…

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