Pensions Data Project
An exciting new pensions research initiative, managed independently on behalf of the entire UK pensions industry by a small group of master trusts and the pensions policy institute (PPI) who shares a common goal of wanting to contribute to a wider societal benefit where everyone has better provision and can achieve a positive outcome in retirement.
The crucial new facet, which does not currently exist anywhere else, is the ability to link across the various pension pots which individuals have with different providers, thus generating unprecedented levels of insight for both pension providers and Government.
What is the Pensions Data Project?
The Pensions Data Project involves combining administrative data from multiple workplace pension providers. It combines details of the Defined Contribution (DC) pension pots of anonymised UK individuals.
In the future, it is hoped that other schemes and providers (both DB and DC) will join the project, and that it will be possible to link up with other datasets, e.g. ASHE.
Why is the Project needed?
Although the Wealth and Assets Survey and the Annual Survey of Hours and Earnings (ASHE) provide significant amounts of data on people’s financial circumstances and employments, there is currently no single combined data set that shows how they are saving for retirement.
The ONS use these surveys, to produce aggregate statistics and individual modelling, but do not answer any of the following types of questions:
How many pension pots do people have?
How often do people move pension provider?
How much is their pension wealth and how does this change over time?
Policy initiatives that this project may feed into
Automatic enrolment in the UK is seen as a success having significantly increased the number of individuals saving for their retirement. However, despite this success, automatic enrolment has also presented several challenges, including the proliferation of small pots, lost pension pots, and concerns over the levels of adequacy.
Proliferation of small pots
One of the primary issues is the proliferation of small pension pots. Corporate Adviser’s Master Trust and GPP Defaults Report highlighted the rapid increase in small pots, with 27.5 million deferred/frozen pension pots (i.e. a pension from a previous employment where no further contributions are being made) existing in 2024. Small pots are an issue because they are not economically viable for a provider to administer and risk being lost by the member.
DWP has been working on a number of solutions, including the multiple default consolidator model, which aims to bring together a member’s deferred small pots into one pot, creating a more efficient pension market. Additionally, the government has made it clear that the future of the workplace DC market lies in fewer, larger, better-run schemes.
The previous small pot consultation suggested that the default consolidator model would involve some mechanism by which one or more providers would become authorised as consolidators. The model would also include some form of ‘clearing house’ designed to perform the process of matching members to consolidators. From there, providers with small pots that they no longer wished to administer could submit their pots, and these would be matched to a consolidator who would consolidate the pot into any other pots belonging to that member at the given consolidator.
Lost pensions and pensions dashboards
Another significant challenge is the issue of lost pension pots. The Pensions Policy Institute (PPI) has estimated that there are now an estimated 3.3 million lost pots, amounting to approximately £31.1 billion worth of assets.
The Pensions Dashboards Programme will enable members to see all of their traceable pots in a single place, without having to remember the details of these pots. To achieve this, all pension providers need to make their data available in a particular format, so that interfaces for this data can be built that would give a saver a “dashboard” showing where their pension pots are held and how much is in them.
Adequacy
The current 8% default contribution rate is seen, for many, to be insufficient to achieve an adequate retirement income. Indeed, according to the PPI’s DC Future Book, the median pot size in 2023 was £12,700. However, some individuals hold multiple pension pots, so the combined value of their savings will be higher.
