The Department for Work and Pensions (DWP) has launched a consultation on plans to automatically combine millions of small workplace pension pots. The proposal targets around 13 million deferred pots each worth less than £1,000, with a combined value of over £4 billion.
The consultation, published on 15 September 2026, sets out how the DWP would establish multiple consolidator schemes to merge these pots without requiring action from savers. This is designed to address the growing number of small deferred pots across the pensions system, which increases by roughly one million pots every year.
Cost savings and structural inefficiency
The Labour Government estimates that this “structural inefficiency” generates administrative costs of approximately £240 million per year across the industry. These costs are ultimately passed on to pension members, the DWP said.
The consolidation would apply to defined contribution (DC) pots held in charge-capped default funds created since automatic enrolment began on 1 October 2012. A default arrangement is defined as one where contributions are invested without the member making an active investment choice.
Eligibility criteria and consultation timeline
To be eligible, a pot must have received no contributions for at least the last 12 months and have a value of £1,000 or less, but greater than zero. The consultation runs for nine weeks from 15 September 2026 to 17 November 2026.
“Please ensure your response reaches us by that date as any replies received later might not be taken into account,” the DWP said. The department also confirmed it aims to publish the government response on the GOV.UK website, typically within 12 weeks of the consultation closing.
Response and publication commitments
“The consultation principles encourage departments to publish a response within 12 weeks or provide an explanation why this isn’t possible,” the DWP added. Where a consultation is linked to a statutory instrument, responses should be published before or at the same time as the instrument is laid.
The report will summarise responses and may quote specific submissions where appropriate. Schemes that do not wish to be quoted should state this clearly in their response. The planned change is expected to reduce the administrative burden on the pensions industry and lower costs for members over time.
