With the DWP's recent announcement of a minor pension pot shake-up, could you receive a boost of £1,000

Old pension funds run the risk of being lost or subject to exorbitant fees

We look at what the government's small pensions pot consolidator plan could mean for you.

Government plans to consolidate small workplace pension pots should make it easier for millions of people to track their pension savings and potentially increase their retirement nest egg by £1,000.

A small pensions pot consolidator will be established by the government as part of reforms announced by the pensions minister today, April 24. Each person's modest savings will be combined into a single pension plan that has been approved as offering savers good value.

Currently, there are 13 million of these tiny pots that hold 1,000 or less, and the government estimates that the number is growing by about one million every year.

Although people have the option to withdraw from the program, government estimates indicate that the action will save pension companies 225 million annually in needless administrative expenses and increase the average worker's retirement savings by about £1,000.

"In the UK, there are now more small pension pots than pensioners, increasing costs and hassle for workers trying to track their savings," says Torsten Bell, the minister of pensions.

"People's small pots will be automatically combined into a single, high-performing pension, saving them money and hassle.

How fees can be reduced by combining small pension funds.

Since auto-enrollment was implemented in 2012, when it became legally required for employers to provide pensions to their employees, the issue of what to do with small pension pots has been getting worse.

People accumulate a number of small pension pots as they move from job to job throughout their working lives. These pots can be hard to manage, and having numerous small pots that all incur fees can make saving for retirement costly.

The head of retirement policy at Quilter, Jon Greer, states: "You may be incurring needless administrative expenses if you have several small pots. Additionally, you might be cross-subsidizing the expenses of managing smaller pots because some providers might offset their losses by charging higher fees on larger pension pots.

You can simplify your retirement planning and save money by combining your small pots. It lessens the administrative strain of overseeing several pots and lowers the possibility of pension pots being lost.

However, the announcements made today only pertain to pensions that are used for automatic enrolment, which usually means that the majority of workplace pensions in the private sector were established since 2013.

This means that people with older pension arrangements are not covered by the exercise and should continue to consider whether they want to take action to consolidate their own pension pots, as noted by Rachel Vahey, head of public policy at AJ Bell.

Statements from the IFS regarding small pension funds.

Today's government announcement comes after the Institute for Fiscal Studies (IFS) called for it to automatically combine small pension funds to prevent them from disappearing in a report released in February.

IFS statistics show that 20 million small pension pots with values under £10,000 are not being contributed to, for a total of nearly £30 billion. More than half of these 12 and 1 million pension funds are worth less than £1,000.

These numbers have increased significantly in recent years, the think tank cautioned, and "the proliferation of these deferred small pension pots is burdensome for both savers and pension providers."

"Deferred" indicates that you intend to access it after you retire but are no longer actively contributing.

You won't be aware of the fees or how your pension is doing if you forget about it, and you will lose out on pension benefits when you retire if you lose it entirely.

According to the IFS, there are benefits to going beyond simply combining small pension plans and pursuing a system in which individuals eventually have one defined contribution pension plan, or a very limited number of them, as they get closer to retirement.

Consolidating small pots, especially micro pots, can be "highly beneficial," according to Lisa Picardo, chief business officer UK of PensionBee, a consolidator.

According to her own research, almost one in five adults in the UK feel certain or think they have lost their pension pot, which translates to about 8 million people. We can assist savers in taking charge of their retirement funds by making consolidation the default for micro pots. This will improve investment results and lessen the chance of lost pensions.

How to proceed with a small pension fund.

It might be wise to combine your small pension funds from a prior employment if they are £10,000 or less.

It might be less expensive to combine it into an existing workplace pension.

Reducing fees, increasing investment options, and obtaining better value when purchasing an annuity are some advantages of consolidating your pension.

According to Steve Webb, a former pensions minister and partner at the consulting firm LCP, there are a few things to consider before consolidating your pension.

"In certain situations, such as when older pensions offer beneficial features (like guaranteed annuity rates) that are unavailable with new pensions, consolidation might not be a good idea.

"Consolidation may also result in the loss of certain small pot privileges. For instance, a pot under £10,000 may be cashed out without triggering the money purchase annual allowance, but a pot over £15,000 cannot. Therefore, consolidation should not be a hasty decision but rather one that is done with care and consideration.

In order to get the best deal and ensure that the pension plan meets their needs, Webb advised anyone considering consolidation to compare prices.

He states: "Do not simply choose the person with the most effective TV ad campaign if the current workplace pension is inadequate or unavailable.

Of course, you should probably leave your defined benefit pension in place if it includes final salary plans. Although the majority of today's workforce cannot access these, they do provide worthwhile, assured benefits.

It is always a good idea to get financial advice before making any decisions regarding a defined benefit pension fund.

How to locate your tiny pension funds.

You risk losing track, which is one of the main issues with having a lot of little pots. This is frequently done when you move and neglect to update your information with previous providers.

31 billion is thought to be in "lost" pensions. As per the Pensions Policy Institute, the average size of a lost retirement fund is 9,470.

If you believe you may have had a pension at a previous job but are unsure of its location, you can contact your former employer and ask for the specifics. Next, get an updated statement from the pension fund and decide whether it makes sense to combine.

You can also use the Government's Pension Tracing Service, which is accessible at gov.gov.uk, if you are unable to locate your previous pension. But, since this isn't a quick fix and finding old pensions could take some time, it might be worthwhile to look through old documents to see if you can locate the information on your own first.