Small pension pots consolidator

Millions of workers juggle multiple small pension pots, often forgotten as they move between jobs, racking up flat-rate fees and making it hard to track retirement savings.

The Department for Work and Pensions’ new Small Pensions Pot Consolidator will automatically merge pots worth £1,000 or less into a single, ‘high performing’ scheme certified to deliver value. This reform is expected to raise the average saver’s pot by around £1,000 over time and slash industry administration costs by roughly £225 million a year.

What employers need to know

• There is no confirmed implementation date yet. Now that the Pension Schemes Bill has Royal Assent, the government plans to consult with the industry and shape the necessary regulations in 2026.
• Some measures are expected to come into effect in 2027/2028, with full implementation likely from 2030.
• Schemes will no longer handle dozens of tiny deferred pots; instead, they’ll transfer them en masse to approved hosts.
• Accurate member data (e.g. name, address, date of birth, NI number) is essential to match small pots correctly. Employers should reassure staff that their details are up to date.
• Employers and payroll teams may be asked to share information about the process with employees. Early awareness helps manage opt-out requests and reduces confusion.

Why this matters in payroll

While pensions sit outside standard payroll processing, streamlined small-pot consolidation can reduce queries at year-end and improve employee engagement with their retirement benefits. Payroll professionals should coordinate with HR and pensions teams to ensure seamless data flows and clear communications.

For full details on how the Small Pots Consolidator works and what steps to take, see the DWP’s press release here.