A leading British pension provider has called for millions of small, inactive retirement accounts valued at under £100 to be returned to their owners to provide immediate financial relief and improve the efficiency of the pension system. Smart Pension, which manages more than £10 billion in workplace pensions, argues that these so-called “micropots” impose administrative burdens and add little value to retirees.

The proliferation of these tiny pension pots is largely attributed to the introduction of the auto-enrolment pension scheme around 14 years ago. Many workers were automatically enrolled into workplace pensions for short periods, resulting in numerous small accounts that now sit dormant. Smart Pension estimates that there are as many as five million such pots across the United Kingdom.

Jamie Fiveash, head of Smart’s master trust platform, emphasized that returning these small sums would not undermine the principle of pension saving. Instead, he pointed out that many micropots originated during the scheme’s early days when contribution rates were low or when individuals missed the opportunity to opt out of pension contributions automatically deducted from wages. According to Fiveash, the cost of administering these small accounts exceeds the value they provide, effectively meaning that larger pension pots subsidize the losses. Removing micropots from the system, he said, would allow pension schemes to operate more efficiently.

The proposal complements recent government initiatives aimed at reforming the retirement sector under the Pension Schemes Act enacted earlier this year. Among the measures is the automatic consolidation of small, dormant pensions—those worth £1,000 or less—into a single account from 2030. This consolidation effort addresses concerns over the approximately £225 million in unnecessary administrative costs associated with servicing numerous small pots annually. Moreover, savers often face disproportionate charges on multiple small pots, which can erode their accumulated savings.

Smart’s call for micropots to be refunded underscores the financial pressures faced by many households amid continuing economic challenges, suggesting that unlocking these funds could provide modest, yet timely, support to individuals. The company frames the refund as a practical step to reduce the complexity and cost burdens within the pension system while offering immediate benefits to consumers struggling with rising living costs.