Pension reforms to cut fees and prevent loss of small pension pots

Major pension reforms will help avoid the “erosion” of small pension pots and protect savers, the Government has suggested.

It comes after the Department for Work and Pensions (DWP) revealed plans to introduce a threshold of £100 or below which a person cannot be charged a flat fee by their pension provider.

According to the report, the new rules will prevent pensions worth £100 or less that are invested in general automatic enrolment funds from being “whittled away” by fees, amid concerns that people who change jobs frequently or undertake short-term contacts are being unfairly penalised.

The measure forms part of wider reforms designed to protect savers and ensure that their retirement funds are being invested correctly.

This includes proposals to “improve people’s understanding of charges” and help them to “better compare pension products” through the upcoming pensions dashboard.

Commenting on the reforms, Minister for Pensions, Guy Opperman said: “We all know what a success automatic enrolment has been in getting more people saving into private pensions – with over 10 million employees paying into a workplace pension since 2012.

“But for some, particularly those who regularly take on short-term work and change jobs frequently, there is a greater chance that they will be automatically enrolled into new workplace pensions a number of times, building up a collection of small pots. It is this group we want to help by changing the way fees work.”

The consultation will close to new responses on 16 July 2021.

For help and advice with related matters, please get in touch with our expert team today.

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