In this second part consultation, which will run for eight weeks until September 5, DWP outlined a number of proposals.
It set out the core framework for a multiple consolidator approach and sought views from respondents on whether they agreed with the proposals.
It proposed that a central clearing house be created to act as a central point informing schemes where to transfer a members’ eligible deferred pot.
The DWP also designed its proposed solution to enable a member to make an active choice in relation to which consolidator they would like their deferred pots to be transferred to.
But it asked respondents to consider how a consolidator would be allocated in cases where a member does not make an active decision which it anticipates being the majority of cases.
Option A would be to allocate all small pots between the providers who meet the criteria to be a consolidator at a level proportionate to their market share.
The intention here would be to mitigate concerns of further promotion of an oligopoly amongst the largest providers by all schemes growing, in terms of small pots transferred in, at their current rate.
Option B would be given the likelihood that a member will have a deferred pot already with a consolidator scheme, this scheme would be allocated as the members consolidator scheme.
In cases where a member has pots with multiple schemes that are authorised consolidators their deferred pots pot could be allocated to the consolidator scheme that holds their largest deferred pot.
DWP said both of these options have their limitations; therefore, it would be interested to hear views from respondents on whether there would be a more appropriate method of allocating a consolidator to a member who does not make an active choice – including whether this role would be better placed sitting with a clearing house rather than the deferred member’s scheme.
It also proposed forming an industry group in late 2023 working with interested parties to explore the design and implementation of the default consolidator framework.
It proposed thata pot would be eligible for automatic consolidation 12 months after the last contribution was made into the pot.
The call for evidence explored how far member exchange could work as a complementary solution alongside either pot follows member or a default consolidator.
“In our view member exchange offers a valuable solution, ahead of the implementation of the multiple default consolidator framework, however, we do recognise that it cannot solve the whole market problem – given contractbased schemes cannot undertake bulk transfers without consent,” DWP said.
