DWP bans flat fees for small pension pots

The Department of Work and Pensions (DWP) has banned the use of flat fees on pension pots of less than £100.

The measure is designed to help employees on the lowest incomes as well as individuals who change jobs more frequently, resulting in a range of different workplace pension schemes.

The Government also confirmed that the charge cap will remain unchanged at 0.75%, though transaction costs are not to be included.

In addition, the DWP added that it has started working on standardising costs to “ensure transparency and consistency” in reporting.

Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association said:

“The cap is an important consumer protection, ensuring savers receive better value for money from their pensions.

“Setting a minimum balance of £100 below which flat administration fees cannot be applied will protect the pension savings of workers with the lowest pension balances but a longer-term solution to the small pots issue must be developed.

“It is important the Government continues to consult with the industry on this issue via the small pots working group as well as on future increases to flat fee balance minimums to deliver a successful automatic enrolment market that works for all savers. “

Speak to us to discuss your pension.