Hargreaves Lansdown tips reform of small pension pot rules in Budget to allow as many as 150,000 to get their money back

7th March 2014

The Chancellor may be poised to allow people with very small pots of pension money to get their money back rather than have to buy an annuity.

The firm points out that a £5000 pension pot will only buy a pension of about £5 a week and suggests it would be much better if people could get their money back.

In a note issued this morning the firm says: “The key announcement we anticipate will be on the small pots Trivial Commutation rules. This may sound a bit, well, trivial but it’s a big deal. We have been campaigning to persuade the Treasury to allow pension investors with small pension pots to have their money back rather than being forced to buy a poor value annuity a £5,000 pot will buy you an income of around £5 a week.

“We think they are about to relax these rules to make it easier for small pots to be paid out as a lump sum. This could affect as many as 150,000 investors every year.

Tom McPhail, head of pensions research says: “Reforming the small pots rule will help to unlock improvements right across the pension system. Small investors will get their money back; insurers will be able to sell better value annuities to large customers and it will help to minimise auto-enrolment opt-outs”.

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