The UK pensions industry should take the lead in consolidating the large number of small pensions by 2030, according to a review by industry body Pensions UK.
Small pension pots often arise when staff change jobs, meaning employees can accumulate a number of small pensions over their working life. Multiple small pensions create confusion for savers and unnecessary admin costs for pension schemes. The drive to consolidate small pensions is intended to help HR boost employee financial wellbeing, cut administrative complexity, and demonstrate long-term commitment to staff retention and retirement security.
With this objective in mind, the Small Pots Feasibility Review was commissioned by the Department for Work and Pensions (DWP). The review, conducted by Pensions UK, assessed the viability of the government’s Multiple Default Consolidator (MDC) model, which is designed to tackle the problem of multiple small pots and was outlined in the Pension Schemes Bill. Small pensions have multiplied in recent years, raising costs for providers and leaving savers struggling to keep track of their retirement money.
The report said that an industry-delivered framework offers a feasible and cost-effective route to consolidation, with the development of a Small Pots Data Platform for 2030. Rather than relying on a centralised system, schemes and consolidators would exchange information directly through common data and messaging standards, supported by strong regulation.
Ongoing costs are expected to be significantly lower than under centralised alternatives, the report said. A second phase of work will focus on refining technical standards, governance, consumer protections and implementation timetables, aligned with secondary legislation.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “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.”
Pensions minister Torsten Bell welcomed the report findings: “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.”
A number of major pension providers backed the report. Colin Clarke, head of product policy strategy at Legal & General, said the study demonstrated that an efficient solution was possible, and Philip Brown, director of policy and public affairs at Nest, described it as “a strong starting point to fix the small pots problem”.
Lizzy Holliday, director of public affairs and policy at Now:Pensions, said the MDC approach was “possible and practical from a technology point of view”.
Angela Staral, chief operating officer at People’s Partnership, said the report showed that automatic consolidation of small deferred pots was “viable”, while Jamie Fiveash, chief executive of Smart Pension, called for industry-wide collaboration with government. Philip Smith, DC director at TPT Retirement Solutions, agreed with the consensus and emphasised that “billions remain unclaimed, inactive or simply lost” under the current system.
The review builds on recommendations made by the government’s Small Pots Delivery Group in April 2025 and on earlier work led jointly by Pensions UK and the Association of British Insurers. It was co-funded by the DWP, Nest, TPT Retirement Solutions, People’s Partnership, Legal & General, Now:Pensions and Smart Pension, with input from consultants Kim Gubler of KGC Associates and Maurice Titley of Lumera.
