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At least 200,000 people could benefit from making transfers between pension funds easier
On Friday the Department for Work and Pensions (DWP) closed a consultation on how transfers of small pots of money between different pension providers could be improved. Small pots are relatively expensive for pension providers to administer and individuals who hold small pots can find it hard to achieve as good a net return as they would be able to achieve on a larger pot. A large number of very small pension pots already exist and the number may well increase after the introduction of auto-enrolment into workplace pension schemes – which is expected to increase the number of people who will at some point contribute to an employer’s pension scheme – unless transfers between schemes are made easier.
New evidence published recently by researchers at the Institute for Fiscal Studies suggests that there are currently £400 million of assets in Great Britain being held in pension accounts that are individually worth less than £2,000 and to which no further contributions are being paid. The research finds that at least 200,000 people could benefit from being able to consolidate these existing small pension pots, if transfers between providers were made easier. This research forms part of a wider project on pension saving and outcomes within defined contribution pensions funded by the National Association of Pension Funds and the Economic and Social Research Council.