What are dormant or inactive pension pots?

• A. Pots with high activity requiring frequent rebalancing.
• B. Pots that have already matured into annuities.
• C. Pots with guaranteed annual increases regardless of contributions.
• D. Pots with little or no activity that may require transfer or consolidation to avoid loss or penalties.

Answer: (D)

Dormant or inactive pension pots are those with little or no activity for a long period. This happens when someone hasn’t contributed to, moved, or actively managed a pot for years, often after changing jobs or losing touch with a provider. Because there’s little or no ongoing activity, these pots can be forgotten, and their value can be eroded by charges or mismanagement. The point of recognizing them is that they may benefit from tracing and, if appropriate, transferring or consolidating into a more active arrangement. Consolidation helps you keep track of your retirement savings, protect any guarantees you have, and avoid the risk of losing touch with the pot or paying unnecessary penalties. The other descriptions describe pots that are actively managed, already transformed into an annuity, or subject to guaranteed increases, which do not capture the idea of inactivity and the need to address it.