The article discusses the importance of reforming workplace pensions through consolidation and focusing on value for money. It highlights how pension savers often neglect older, less valuable products, leading to numerous small pension pots—13 million holding £1,000 or less—that contribute to industry fragmentation. While auto-enrolment has fostered a pension savings culture, the growing number of small pots is unsustainable. The potential for consolidation could improve consumer outcomes and industry efficiency, although challenges in implementing a commercial model remain.
Reforming workplace pensions through the lens of value for money and consolidation is to be applauded. Too often pension savers neglect old, poorer value pension products, or else forget about very small pots.
Consolidation of these is beneficial for individual consumer outcomes as well as to the wider industry's ability to serve customers appropriately and drive economies of scale.
With 13 million small pots holding £1,000 or less, and the number increasing by around one million a year, the industry was on an unsustainable path of fragmentation.
Challenges lie ahead in terms of the implementation of a commercial model, but the direction of travel in terms of tackling this is encouraging.
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