The Department for Work and Pensions has announced plans to change the way we're charged for our pensions, including protecting people who have a number of small pension pots from having their savings eroded.
The proposals, which are now under consultation for eight weeks, include introducing a threshold of £100 per pension pot, below which pension providers will be forbidden from charging a flat fee. The DWP argues the current rules leave those with a number of small pension pots open to having their savings drained through these flat fees.
"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," said Guy Opperman, the pensions minister.
"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 DWP says the consultation is also seeking views on "moving to a single, universal charging structure" for pensions, though gives few details on this potential change. It also admits the changes could negatively impact those who "use an alternative charging structure".
A former pensions minister, Steve Webb, told the Financial Times he welcomed the proposals but warned the government to "tread very carefully".
He said: "Allowing members to shop around for a different pension provider could add considerably to burdens on employers and could destabilise the whole basis on which automatic enrolment was established."
