New measures to protect small pension schemes from being eroded by fees and charges were laid out in Parliament earlier this week.
The rules, which come into effect from April 2022, mean pension savings invested in default funds of schemes used for auto-enrolment with a value of £100 or less will be exempt from flat fees.
Since its introduction in 2012, auto-enrolment has seen the percentage of eligible employees participating in workplace pensions grow from 55% to 88%.
Guy Opperman, pensions minister, said:
“Auto-enrolment has truly revolutionised pension saving in the UK. More than 10 million people have been enrolled into a workplace pension, with an additional £28.4 billion per year being saved since 2012.
“By removing flat fees on pension savings worth less than £100, we’re protecting savers, particularly those who regularly take on short-term work or change jobs frequently, and helping them build for their financial futures.”
Tim Pike, head of modelling at the Pensions Policy Institute, added:
“The removal of flat fees from very small pots will place additional pressure to cross-subsidise in schemes with a large proportion of small, deferred pots, mainly master trust schemes, and will result in higher charges for members with larger pots.”
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