£1,000 retirement savings boost from plans to bring together small pension pots
Source: gov.uk (2025-04-23)

Millions of Brits will find it easier to track their pension savings with the creation of a small pensions pot consolidator, in reforms unveiled by the pensions minister today (Thursday 24 April).

- Government unveils reforms to combine small pension pots to make working people better off as part of Plan for Change
- Move is set to boost retirement savings for the average worker by around £1000 and save businesses £225 million a year in unnecessary admin costs
- Comes as part of Pension Schemes Bill which will drive investment in pensions industry and deliver on the government’s growth mission
This new initiative will tackle the growing problem of small, forgotten pension pots that many people accumulate as they move between employers over their working lives. There are now 13 million of these small pots, holding £1,000 or less, with the number increasing by around one million a year.

This is a hassle for savers and can stop them getting a good return on their savings if they have to pay multiple flat rate charges. Overseeing all these small pots also costs the pensions industry around £225 million in unnecessary admin costs.

Under reforms introduced by this government as part of the Pension Schemes Bill, each individual’s small pots will be brought together into one pension scheme that is certified as delivering good value to savers. Individuals will retain the right to opt out.

This will cut costs for savers and make it easier to keep track of their pensions while boosting living standards and make working people better off. It will also cut red tape for businesses managing the schemes and unlock economic growth as part of the Plan for Change.

This announcement will reduce costs as well as hassle for savers, in time increasing the pension pot of an average earner by around £1,000 - boosting living standards and making working people better off. It will also cut red tape for businesses managing the schemes and unlock economic growth as part of the Plan for Change.

Minister for Pensions Torsten Bell said:

It’s great news that more people are saving for their retirement. But I want to make pension saving as simple and rewarding as possible.

There are now more small pension pots in the UK than pensioners – raising costs and hassle for workers trying to track their savings. It also costs the pensions industry hundreds of millions of pounds every year.

We will automatically bring together people’s small pots into one high performing pension, reducing costs as well as hassle for savers. In time this could boost the pension of an average earner by around £1,000 as part of our Plan for Change to put more money in people’s pockets.

The announcement follows the work of the Small Pots Delivery Group. Their findings, aimed at supporting the design and implementation of the new small pots consolidator scheme, include:
- A Small Pots Data Platform to identify and source the pension pots that could be consolidated.
- A framework setting out the rules a scheme would need to follow to become a consolidator scheme. These would include already being in an Automatic Enrolment qualifying scheme, having a specified level of scale to manage expansion, providing good value for money for their members and providing additional protection for members from flat fee charges.
- Safeguards for savers whose pension pots would be consolidated which include a member op-out option.
Transforming the pension landscape through the Pension Schemes Bill, set to be introduced in Parliament later this Spring, will deliver on the government’s manifesto commitment to boost investment and returns for savers and make working people better off.

The Bill will help over 15 million people, boost pension pots by £11,000 and spur on greater investment in productive assets.

Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, said:

The accumulation of small pots creates unnecessary cost and complexity for savers and schemes alike. The PLSA has worked extensively with industry and the DWP to propose solutions and supports the model being proposed by the Government.

We look forward to working on delivering the recommendations of the Small Pots Development Group and are pleased the Government is tackling this long-standing issue in the Pension Schemes Bill.

Rocio Concha, Which? Director of Policy and Advocacy, said:

Which? called for the consolidation of small pots under £1,000 before the election, so we are delighted that the government is committing to doing this - a move that will provide greater value for savers and support them to keep track of their pensions.

Which? looks forward to working with the government to ensure the pensions system is fit for the modern age.

Gail Izat, Workplace Managing Director at Standard Life, part of Phoenix Group said:

The number of small pots in the system is growing at a rate of knots and ultimately heightens the risk that people will lose track of their hard-earned savings.

The introduction of consolidators that can administer these pots effectively and invest them dynamically will be a step forward and when combined with pension dashboards will empower people to take control of their savings. We look forward to working with government on the creation of this new system.

Additional Information
- The Small Pots Delivery Group report can be found here: Small Pots Delivery Group Report - GOV.UK (https://www.gov.uk/government/publications/small-pots-delivery-group-report)
The Delivery Group was chaired by the DWP and had representation from:

The Financial Conduct Authority

The Pensions Regulator

Pension and Lifetime Savings Association

Association of British Insurers

Pensions Administration Standards Association

Chartered Institute of Payroll Professionals

Association of Pensions Lawyers

Which?

Federation of Small Businesses

Confederation of British Industry

Chair of the industry led Small Pots Coordination Group

Pensions Policy Institute