Mark Hyde Harrison said introducing a limited number of large trusts would allow the aggregation of the small pension pots people build up as they move jobs.
NAPF-funded research published earlier this year found that £1.4bn is already trapped in 700,000 stranded workplace defined contribution (DC) pension pots worth less than £5,000. The number of these small pots is expected to increase significantly when pensions auto-enrolment begins later this year.
Pot proliferation should be looked at as part of efforts to find a wider solution to solving the problems associated with defined contribution pensions, Mr Hyde Harrison explained.
‘We’re in danger of moving from a world where we had institutionalised pension provision into more of a retail environment which is going to lead to higher costs and changes and less efficient structures.’
Mr Hyde Harrison said: ‘Super-trusts are aligned to members and achieve scale. They would be end-of-service providers and would align with members to give them good outcomes.’
The trusts could have strong governance standards, as well as driving down costs and charges and forcing transparency in the annuity marketplace. ‘It ensures you have someone speaking for members and acting in market in their interests,’ he added.
Mr Hyde Harrison said that, if the government did succeed in improving the DC system, it would have benefits for the country as a whole, as well as savers.
‘If they do get better outcomes for individuals it will probably lead to less leakage, more money spent in the UK and less reliance on benefits.’
But, he added, action was needed now. ‘We need to take decisive action and need to think about these things now if auto-enrolment is going to be the success we all hope it will be,’ he said.