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Pensions experts have called for the government to allow people to cash in their small pensions pots.

John Lawson head of pensions policy for Standard Life said it was a reasonable thing to ask in light of current legislation going through Parliament.

He said: "There is legislation going through Parliament to allow trustees of occupational schemes to trivially commute small benefits. If your total pension assets are less than 1 per cent of the life time allowance, which is currently £16,500 you can take it all out in cash, subject to tax.

"This new legislation going through is on top of that and will allow trustees with small pensions pots, for example under £2000, to pay out the benefits in cash. It is just to avoid paying a small scheme.

"It makes a lot of sense to pay out a cash sum, the government would probably want to tax that sum."

However Chris Curry, pensions research director at the Pensions Policy Institute said: "If the lump sum is really that small it is quite diffcult to get good value to try and transfer it to another provider.

"It is difficult to say for definite if one person should do one thing or another. It is important to view it in context of other assets, role of the state or private pension they may have or any other savings."

Tony Vine-Lott, director-general of Tax Incentivised Savings Association, agreed with Mr Lawson, saying people with pension pots under £2000 should be able to cash them because it was harder to get annuities for them.

He explained: "You cannot really buy an annuity under £3000 so you cannot really do anything with it. So we think that you should be able to just cash it. It is increasingly becoming difficult to buy an annuity for fewer than £5000 in many circumstances as there are only one or two providers that would do that.

"We are trying to make it easier for people who have little bits of money. You may get around £120 a year from a pension pot worth £2000, which is £10 a month."

According to figures from the Association of British Insurers there were more than 102,000 pension annuities sold with a value of less than £5000 last year.