The Department for Work and Pensions is planning to automatically consolidate millions of small workplace pension pots worth £1,000 or less. The scheme, set to launch by 2030, could affect 20 million pension pots and targets the 13 million workplace pensions currently worth under £1,000.
Scope of the consolidation scheme
These small pots collectively hold £4bn in retirement savings, with an additional one million new pots created annually. The consolidation would initially focus on inactive pensions created since automatic enrolment began in October 2012. Only pots that haven't received contributions for at least 12 months would be automatically moved.
Saver options and control
Consumer watchdog Which? has examined both sides of whether savers should consolidate now or wait for the new system. The government estimates around 20 million pension pots will fall within scope when officially introduced.
Savers will retain control over the process and can opt out entirely if they prefer. Officials say the framework requires schemes to formally communicate options before any automatic transfer goes ahead. Those happy with consolidation but wanting choice can select an alternative consolidator that better matches their financial goals.
