Our proposed approach for improving the value of small pot retirement funds is based on a centralised authorized regulatory regime. It aims to reduce fees to members of workplace pensions, facilitate large pension pots for comfortable retirement income, and improve engagement in retirement planning.

The model’s design is based on a hub and spoke approach where the DWP would establish the hub with a series of enabling services that verify information to regulated third-party providers (clearing houses) who facilitate the money and data exchange across the industry.

By leveraging existing technology frameworks, including proven data standards, integration methods, process flows, software components and tried-tested communication strategies, the UK market would be able to establish world-leading capabilities in a short timeframe in a cost-efficient manner, ensuring that members’ interests and outcomes are kept central for all key decisions

The establishment of the hub and spoke model would provide future benefits beyond the immediate requirement to help solve the inactive smaller pot challenge as this same framework could be extended to support member choice, or ‘Pot follows Member,’ where new joiners can choose which scheme they want their employer’s pension contributions to be sent to or continue contributing to a current scheme. Such initiatives are imperative to ensuring that duplicate pots continue to be managed.

Regarding the default consolidator models proposed, SuperChoice believes the Multiple Default Consolidator Model is the ideal model for the UK market, followed by introducing a member-centric workplace model, which will support fulfilling all of the DWP’s stated objectives in its consultation proposal.

In conclusion, SuperChoice’s response to the DWP’s consultation proposal outlines its practical delivery path to reduce fees (due to multiple pots) to members of workplace pensions and improve outcomes for current and future retirement savers. The company offers its experience and framework to fast-track the UK’s implementation of the Multiple Default Consolidator Model and recommends consolidating inactive smaller pots and introducing member choices to address the proliferation of deferred small pots.

SuperChoice’s complete response to the DWP’s Consultation on ‘Ending the proliferation of deferred small pots’ is available here. For more information, please get in touch with Paul Richardson at paul.richardson@superchoiceservices.co.uk