“We'll have a portal up and running very soon for people to check whether they might have been affected by this, and we'll be starting the process of writing later this year.”
Small pots vs consolidation
In an update earlier this week (July 11), DWP said it will work to encourage consolidation to solve the problem of small pots rather than pursue the "pot follows member" approach.
But Trott said the longer-term solution to this issue would be to move to an Australian-style "pot for life" system.
In the evidence session, Trott said: “The response we put out said that for the stock of small pots, we are going with a default consolidator on the carousel model, which will mean that for pots of £1,000 will be put into a default consolidator and we are going through a consultation and exactly how that will work.
“It’s going to be a carousel so it's going to be more than one so we decided to go for not one individual scheme, but a number. We’re consulting on how exactly that's going to work at the moment, we're asking for views from industry and from pension savers.”
She explained that this will fix the issue of the existing stock of small pots but what it won't do is stop the creation of new small pots.
“That's where I think we need to do some more work on what the right model is,” she said.
“We're gonna be doing that over the summer with the hope of looking at what more we can do when we introduce the automatic enrollment consultation. I want to see whether we can look at models for what we can do with the flow as part of that.”
Auto-enrolment and VFM
One of the things DWP is looking at is whether it should do stapling or a lifetime provider model.
Trott said: “We need to look at how CDCs can play a role in this and it's very important that the new and emerging models that we have within the pensions market are taken into account.
“I also recognise that there is a role that the employer plays and we need to balance these two things out so I think this is somewhere where we need to have a lot more conversations. We need to consult properly with industry and with savers and then come up with a model that which we consult on in the autumn.”
However, members on the committee raised concerns that stapling people to a lifetime pension provider could reduce the employer role in choosing an auto enrolment scheme provider.
