Problems with small pension pots

A two-page feature in the Financial Times focused on the problems encountered by employees who end up with small pension pots.

For sums under £10,000, there is no competitive annuity market so if you take a normal pension income you get a much poorer return than those with larger sums. Under ‘trivial commutation’ rules, some ‘standalone’ pension pots of £2,000 can be taken as lump sums but the rules are complex and many schemes make it hard for people to cash in small pensions. Aggregating a set of small pots into one fund can help, while some insurers are now pro-actively offering lump sums to those who have converted pension pots into small incomes.