The Department for Work and Pensions has launched a consultation which sets out proposals for the implementation of automatic consolidation of deferred small pots through the establishment of consolidator schemes.
The consolidators are intended to help tackle the increasing number of deferred small pension pots across the pensions system.
The consultation has been formed in the wake of the Pension Schemes Act 2026, and looks to support the government to make decisions ensuring the successful delivery of the Multiple Default Consolidator solution.
Across the workplace pensions market today, there are around 13 million deferred small pension pots, with that number estimated to grow by more than a million every year. The DWP estimates it costs the industry £240m annually in administration, costs that ultimately fall on scheme members.
Torsten Bell, UK minister for pensions, says: “Our ambition is clear: to have small pot consolidation operational from 2030. This is a reform built for the long term, and we want to hear your views on how to make this work in practice; your insights will be vital in shaping a system that delivers for members and the industry.”
The consultation seeks input from pension scheme providers, trustees, scheme managers, members of workplace pension schemes, employee representatives, trade unions, consumer groups, employers and employee representative groups, pension industry professionals, and members of the advisory community and any other interested stakeholders.
Maurice Titley, commercial director for data and dashboards at insurtech Lumera, says: “By allowing schemes to continue exchanging data, carrying out matching activity and undertaking transfers through scheme-led processes, within a common framework of rules, standards and governance, the consolidation approach should provide an efficient and scalable model, balancing operational practicality with strong governance, and alignment with the DWP’s roadmap.”
The consultation also claimed that low levels of member engagement further exacerbate the small pots issue. It stated that many individuals have limited understanding of their pension arrangements, do not regularly review their savings, or are unaware that they hold multiple small pots. In some cases, members may lose track of their pensions altogether. This fragmentation can lead to duplicated charges, reduced value for money, and poorer retirement outcomes.
The consultation will run for nine weeks, ending on 17 November.