DWP update as significant pension ‘shake-up’ set to take place – are you affected?

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The DWP is laying out its plans to change its approach to smaller pension pots, in order to protect Britons and their finances. It has launched a consultation into the matter which would see a change to the way pensions are managed by providers. Many people will have a small pension pot, either from staying in a job for a short period of time, or for other reasons.

Some do not have a constant or steady income from one particular job, which means their pension pot could be substantially smaller than others.

But with pension arrangements often come fees for management and other related costs, which may eat away at a person’s pot somewhat.

Under the Government’s consultation, these kind of fees would be limited in efforts to protect smaller pension pots.

Proposals have included introducing a threshold of £100 or below, where a person cannot be charged a flat fee by their pension provider.

This, the Government says, could help to protect smaller pension pots and the savers who hold them.

It is likely to be good news for those who change contracts or jobs frequently, or have less steady income.

It is also hoped the consultation will help people to better understand their pension arrangement.

It is a step towards the long-awaited pensions dashboard, allowing people to keep track of their retirement savings in one easily accessible place. 

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Minister for Pensions, Guy Opperman, said: “We all known 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 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.”

As people approach retirement, they are encouraged to hunt down all of their pension pots – even smaller arrangements from the past.

They may then be able to consolidate these pots to make them easier to manage. 

But Britons will need to act fairly quickly if they wish to have their say on the matter.

This is because the consultation is only open for responses until July 16, 2021.

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The Government will then be compiling feedback from pension scheme providers, trustees, members and others. 

It has stated responses to the consultation are set to be released in late 2021. 

Those who are looking for retirement help are advised to use the Government-backed Pension Wise service which can assist those who are looking to manage their money. 

MoneyHelper (previously the Money Advice Service) can also help, and certain individuals may wish to consult a financial adviser. 

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