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Govt to look at ‘pooling’ small pension pots

London UK Thames Parliament 480

The Government says it will consider plans for the pensions industry to deliver a “pooling” mechanism to allow people with small pots to get a better annuity deal from insurance companies.

Speaking at a House of Lords debate on small pension funds on Tuesday, Lord John Patten called on policymakers to explore whether a vehicle could be created to combine 1.1 million pension accounts with £5,000 or less in them. The Conservative peer said the combined value of the small funds is more than £2bn.

Patten said: “It may be possible for those in the market to think of setting up a vehicle which would help, by pooling resources, to get a better deal for pensions, strictly regulated though it should be.

“Therefore I would like to put before your Lordships and, indeed, before my noble friend the minister, an idea which I hope the Government will not stand in the way of: someone trying to set up such a body whereby the purchasing power of small pension holders could be pooled and used to their advantage.”

Labour Baroness Patricia Hollis said small pension pots are “stolen” by the current system.

She said: “Low-paid, part-time [workers] – women especially, as they are in and out of the labour market – will collect a portfolio of small pots…some of which will be inaccessible to them at retirement as the situation now stands.

“Those pots will go AWOL and be inaccessible – frankly stolen from them by the structure of the pensions industry that we, all together, have constructed and inherited.”

Responding for the Government, Baroness Tina Stowell said: “The Government welcome innovations to the industry that meet the needs of consumers, so my noble friend’s idea [of pooling small pension pots] is one that we would certainly want to consider further.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Labour Baroness Patricia Hollis said small pension pots are “stolen” by the current system.

    Obviously demonstrating a total lack of understanding on what options are available – triviallity et al.

  2. “Stolen by the pensions industry” What utter tripe. I know for a fact that product providers spend a lot of time & effort in tracing policyholders who might have slipped off the grid, so to speak. The Pension Tracing system is excellent, and free, so all it would require is a flyer to be sent to people approaching retirement/BSP age with the web address in large letters.

    Now what someone does once they have been reunited with their “stolen” pots is another question all together; perhaps I might ask the FSA what they might recommend………

  3. These small pots are going to get bugger-all as an annuity.

    Just give them their money back less a tax charge of 20%.

    Tax revenue to the beleaguered Treasury and money to be spent in the economy on which another 20% VAT will be passed on to the beleaguered Treasury.

    Sorted.

  4. Surely, commutation through triviality covers this, and so as the policyholder is likely to be a non-taxpayer, will in fact have had a great retuern on a very modest investment. Why would they be ‘stolen’?

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