If you've switched jobs a few times, chances are you’ve got a few small pension pots floating around — and you’re not alone. Millions of people are in the same boat, and it’s costing both savers and businesses a lot of money. But good news: major changes are on the way that could make a real difference to your retirement savings.
On 24 April, the government unveiled a plan to automatically consolidate small pension pots into one high-performing scheme. This reform, part of the new Pension Schemes Bill, aims to boost the average worker’s retirement pot by around £1,000 while making pensions much easier to manage.
What’s the Problem?
Right now, there are around 13 million small pension pots (each worth under £1,000) across the UK, with that number growing by about a million every year. Each time you change jobs, you often leave a small pension behind. Over time, this creates a hassle for savers — and results in multiple flat-rate fees that eat away at your savings.
It’s also a nightmare for the pensions industry, costing around £225 million a year in unnecessary admin costs. Not exactly the best use of money — either for businesses or for savers trying to build up a decent retirement fund.
The Solution: Automatic Consolidation
Under the new reforms, your small pension pots will be automatically combined into a certified "consolidator" pension scheme, designed to offer good value and better returns. You’ll still have the right to opt out if you prefer to keep things separate.
Consolidator schemes will have to meet strict standards — including offering good value for money, already qualifying for automatic enrolment, and being big enough to manage all the extra members.
By bringing all your small pots together, the government hopes to:
- Cut costs for savers.
- Stop money being lost to multiple fees.
- Make pensions easier to track and manage.
- Boost retirement savings for the average worker by around £1,000 over time.
Safeguards for Savers
To protect savers, there will be:
- Strict rules on which schemes can act as consolidators.
- A Small Pots Data Platform to help identify and match pots for consolidation.
- A member opt-out option, giving you control over your savings.
The reforms aim not just to make life easier for savers but to free up billions for investment across the economy — boosting growth as part of the government’s wider Plan for Change.
What This Means for You
If you have small pensions scattered around from previous jobs, you could benefit without having to lift a finger. Over time, your retirement savings could grow by an extra £1,000 — just by avoiding duplicate charges and getting better investment returns.
The Pension Schemes Bill is expected to be introduced to Parliament later this spring, so stay tuned. This could be one of the simplest ways the government has found in years to put more money in workers' pockets — and make pensions a lot less confusing.
