New rules for savers with small pension pots
Plans to protect small pension pots from being eroded by charges will be introduced next year in a move which the government says ‘puts savers’ interests first.
The Department for Work and Pensions (DWP) set out the rules which will introduce a threshold at which pensions providers will no longer be able to charge a flat fee to savers.
The rules mean pension savings invested in the default funds of schemes used for auto-enrolment with a value of £100 or less will be exempt from paying flat fees from April next year.
Guy Opperman, minister for pensions, 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 deferred small pots.
“Removing flat fees on pension savings worth less than £100 will provide a boost to hundreds of thousands of people and help them enjoy the retirement they deserve.”
The introduction of the threshold – known as the ‘de minimis’ – will complement plans to introduce pensions dashboards, which will allow individuals to keep track of their small pension pots more easily, helping them to better plan for retirement.
The DWP first announced proposals to ban flat fees on small pension pots earlier this year.