Flat fees on small pension pots will soon be banned

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Automatic enrolment has meant that many of us now have pensions that we may not otherwise have bothered with until much later in life.

But for those on lower salaries or who change jobs a lot, it could mean tiny pension pots scattered all over the place.

In some cases, the management and admin fees can eat into the amount of capital you hold in those pension pots as they’re higher than the value of growth.

But there is good news – the government will soon be banning flat fees on small pension pots that are worth £100 or less.

This is the amount that research suggests will disappear over a 22-year-old’s working life, assuming they don’t put any more money in.

Announcing the news, Guy Opperman, minister for pensions, said: “Removing flat fees on pension pots worth less than £100 will boost the pensions of hundreds of thousands of people and help them enjoy the retirement they deserve.

“We will also be introducing pensions dashboards, which will make it easier for savers to track these smaller pension pots and ensure they’re getting the most from their savings.”

Of course, the pension will still be subject to, for example, management fees, which are generally a percentage of the value of the pot. In effect, the pot could still dwindle, but at a slower rate.

It’s one of the reasons why you might want to merge your pension pots.