When people switch job roles, they often find themselves with lots of pension pots from various employer schemes. While some look to amalgamate these pots, others choose not to or find that they cannot due to the the rules of the scheme they are in.
This leaves the pension pot withering away with the yearly charges because individuals can no longer add to the pot. Today Pensions Minister, Guy Opperman has sought to make change by introducing proposals that if a pension pot falls below the threshold of £100, no further fees will be charged by the pension provider. The aim is to halt the erosion of the small pot pensions.
The Minister 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 Department is also consulting on how to improve understanding of pensions to help people do more to compare product and ensure their pension is right or them. It is hoped that eventually the small pots can be hooked up to an online pensions dashboard, confirming state pension as well as any other smaller pots, so they can all be viewed in one place.
While feedback is currently being sought from pension providers, these changes could help a lot of people to be better able to prepare for retirement.