Helen Forrest: Should employers encourage the consolidation of small pension pots?

Auto-enrolment is proving tremendously successful. By the time of next year’s general election, 4.3 million workers at more than 50,000 employers will be in a pension scheme, or saving more, as a result of these reforms, according to National Association of Pension Fund (NAPF) research, published in October 2013.


But many of these new pension savers might only contribute small amounts each month and change jobs frequently, which means they may shift between pension schemes and leave a trail of small pots behind them.

Consolidating small pots brings the benefit of economies of scale and reduced costs. An equally important consideration is that these small pots can be difficult to keep track of and could get lost over the course of an individual’s working life, particularly if the employee does not keep some details on them.

Recent figures from the Pension Tracing Service show this is a growing issue. In 2013-2014, the service received 144,169 requests for traces, of which 17,265 were unsuccessful.

If we do nothing, there could be 50 million pension pots left dormant by 2050, according to figures issued by the Department for Work and Pensions in April 2013, and 12 million of these would have a value of less than £2,000.

A lost pension pot is lost retirement income and clearly something to avoid where possible. While we may disagree on the government’s preferred process for consolidation, the NAPF supports efforts to consolidate individuals’ small pots in one place so employees are left with a smaller number of large pots when they retire. 

Helen Forrest is head of policy and advocacy at the National Association of Pension Funds