Pensions UK has published its Small Pots Feasibility Review, calling for an industry-led approach to consolidating small pension pots by 2030 to cut costs and simplify pensions for savers.
The Department for Work and Pensions (DWP) asked Pensions UK to assess the practical and technical feasibility of the Government’s Multiple Default Consolidator (MDC) model, as set out in the Pension Schemes Bill.
The review builds on work by the Small Pots Coordination Group, led by Pensions UK and the ABI, and the Government’s Small Pots Delivery Group, highlighting the need for a pragmatic delivery approach.
The report concludes that an industry-led model using existing infrastructure is technically and financially viable. It would allow schemes and consolidators to interact through agreed data and messaging standards, rather than creating a centralised system.
It calls for strong governance and regulatory oversight and notes that further work is needed on technical standards, consumer protections and implementation. The review reflects consultation with trust-based, contract-based, and hybrid schemes as well as DWP, TPR and FCA.
Pensions UK executive director of policy and advocacy Zoe Alexander says: “This Review shows that a practical solution to combine millions of small pension pots is within reach — one that delivers value for members, enables schemes to operate effectively, and ensures policy objectives are met. By working together, Government, regulators, and industry can deliver consolidation in a way that is efficient, fair, and beneficial for millions of savers.”
Minister for Pensions Torsten Bell says: “With more small pots than pensioners in the UK, too many people are losing track of their hard-earned savings. This is bad for pensions savers and bad for the pensions system.
“I welcome this report which underlines our commitment to working with industry to fix that. Alongside progress on dashboards, tackling small pots is a crucial step to help millions of people stay connected to their savings and improve their retirement security.”
L&G head of product policy strategy Colin Clarke says: “Addressing the proliferation of small pots is one of many challenges that the industry faces over the coming years and this report highlights that an efficient, cost-effective solution is possible. L&G are pleased to have contributed to the review and look forward to continuing to work closely with government, regulators and industry to deliver a framework that helps deliver better retirement outcomes for pension savers.”
Nest director of policy and public affairs Philip Brown says: “We’re proud to have been a sponsor of the Feasibility Study and this report is a strong starting point to fix the small pots problem. We look forward to the next phase of work which will be to tackle the key questions around regulation, governance, and standards, to make sure the system works smoothly and delivers the best outcomes for savers.”
Now:Pensions director of public affairs and policy Lizzy Holliday says: “This Feasibility Report is an important step forward in showing the multiple default consolidator solution for small pots, as outlined in the Penson Schemes Bill, is possible and practical from a technology point of view. We thank the reviewers for the pace of work and for outlining areas for further development. We look forward to continuing to work with Government and industry in resolving outstanding questions and exploring the implications of the report – including next steps for the critical policy, governance and delivery assessments and decisions that will support a successful implementation.”
People’s Partnership chief operating officer Angela Staral says: “The Small Pots Feasibility Review is an immensely important piece of research, which we are proud to have co-funded. The report shows that the automatic consolidation of small, deferred pension pots is viable. Now it’s time for government and the wider pensions sector to deliver this reform and resolve the small pots problem in the interests of pension savers and their financial wellbeing in retirement.”
Smart Pension chief executive Jamie Fiveash says: “We were delighted to take part in this feasibility study. It’s important the industry learns from the past to shape the best future for our members. Only by positively embracing change and working collaboratively across industry, and with Government, will we deliver effective solutions that solve real issues for savers.”
TPT Retirement Solutions DC director Philip Smith says: “This crucial review addresses the worrying proliferation in small pots and the resulting challenge people face when trying to track down their different pensions. Too many workers’ pensions are getting lost in the current system, preventing them from building a full picture of their future retirement. The stark reality is that billions remain unclaimed, inactive or simply lost. By setting out a clear plan, industry and government can more effectively collaborate to reduce this fragmentation and empower savers to make informed decisions. We’re proud to be a part of the driving force behind this agenda, which could help to put thousands more into the pockets of future pensioners.”