DWP announces small pension pot shake-up – could you get £1,000 retirement savings boost?
If you have old pension pots, you risk paying high fees or losing track of them. We look at what the government's small pensions pot consolidator plan could mean for you


Millions of people should find it easier to track their pension savings – and could get a boost of £1,000 into their retirement nest egg – under government plans to consolidate small workplace pension pots.
In reforms unveiled by the pensions minister today (24 April), the government will create a small pensions pot consolidator. Each individual’s small pots will be brought together into one pension scheme that is certified as delivering good value to savers.
There are now 13 million of these small pots, holding £1,000 or less, with the number increasing by around one million a year, according to government estimates.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Individuals can choose to opt out of the scheme, but the move is set to boost retirement savings for the average worker by around £1,000, and save pension businesses £225 million a year in unnecessary admin costs, according to government calculations.
Pensions minister Torsten Bell says: “There are now more small pension pots in the UK than pensioners – raising costs and hassle for workers trying to track their savings.
“We will automatically bring together people’s small pots into one high performing pension, reducing costs as well as hassle for savers.”
How consolidating small pension pots can save on fees
The problem of what to do with small pension pots has been growing since the introduction of auto-enrolment in 2012, when it became law for employers to offer workers a pension.
As people move from job to job over their working lives, they accumulate a number of small pension pots that can be difficult to keep track of, and having lots of small pots all attracting fees can be an expensive way to save for retirement.
Jon Greer, head of retirement policy at Quilter, says: “If you have multiple small pots, you could be paying unnecessary administrative costs. Additionally, some providers may offset their losses by charging higher fees on larger pension pots, meaning you could be cross-subsidising the costs associated with managing smaller pots.
“Consolidating your small pots can save money and simplify your retirement planning. It reduces the administrative burden of managing multiple pots and minimises the chance of lost pension pots.”
However, today’s announcements only apply to pensions used for automatic enrolment, which, broadly speaking, means most private sector workplace pensions set up since 2013.
As Rachel Vahey, head of public policy at AJ Bell, points out: “That means those with older pension arrangements are outside the scope of the exercise and should still be thinking about whether they wish to take steps to consolidate their pension pots themselves.”
What the IFS says about small pension pots
Today’s announcement by the government follows calls for it to automatically consolidate small pension pots to avoid them getting lost from the Institute for Fiscal Studies (IFS) in a report in February.
According to IFS figures there are 20 million small pension pots worth less than £10,000 that are not being contributed to, totalling almost £30 billion. Over half of these pension pots – 12.1 million – are worth less than £1,000.
The think tank warned these figures have grown rapidly in recent years, and “the proliferation of these deferred small pension pots is burdensome for both savers and pension providers”.
“Deferred” means you no longer actively contribute but hope to draw from it when you retire.
If you forget about your pension, you won’t be aware of the fees or how it’s performing, and if you lose it completely, you’ll miss out on pension benefits when you retire.
The IFS also says there are merits of going further than just consolidating small pots, and moving towards a system where people end up with one defined contribution pension pot, or only a very small number of these, as they approach retirement.
Lisa Picardo, chief business officer UK of PensionBee, a consolidator, says small pot consolidation, particularly for micro pots, can be “highly beneficial”.
She notes: “Our own research shows that nearly one in five UK adults feel certain or believe they have lost a pension pot, equating to approximately 8.8 million individuals. By making consolidation the default for micro pots, we can help savers take control of their retirement savings, reducing the likelihood of lost pensions while also improving investment outcomes.”
What to do if you have a small pension pot
If you have small pension pots from a previous job – around £10,000 or less – then it may make sense to consolidate them.
You could consolidate it into a current workplace pension, where costs could be lower.
Benefits to consolidating your pension include: your pension is easier to manage and track, you may lower your fees, gain wider investment choice and get better value when buying an annuity.
However there are things to think about before you consolidate your pension, according to Steve Webb, former pensions minister and partner at consulting firm LCP.
“There are some cases where consolidation may not be a good idea, including where old pensions have valuable features (for example, guaranteed annuity rates) that are not available with new pensions.
“There are also ‘small pots privileges’ which could be lost if you consolidate – for example, a pot under £10,000 can be cashed out without triggering the ‘money purchase annual allowance’, but a pot of £15,000 cannot. Consolidation should therefore be done carefully and thoughtfully and not as a knee-jerk response.”
Webb added that for anyone thinking about consolidation, they should shop around to get the best deal and make sure the pension scheme suits their needs.
He says: “If the current workplace pension is not suitable or not available, do not just go with whoever has the best TV advertising campaign.”
Of course, if you have a defined benefit pension – which includes final salary plans – then you should probably leave it where it is. Though these are not available to most of the workforce today, they offer valuable, guaranteed benefits.
If you are unsure about what to do with a defined benefit pension fund, it is always a good idea to seek financial advice before taking any action.
How to track down your small pension pots
One of the biggest problems with having loads of small pots is that you are likely to lose track. This is often done when you move home and forget to update your details with past providers.
An estimated £31 billion sits in “lost” pensions. The average size of a lost retirement fund is £9,470, according to the Pensions Policy Institute.
If you think you may have had a pension at a previous job but are not sure where it is held, you can get in touch with your old employer and simply ask for the details. Then, contact the pension fund and ask for an updated statement and consider if it is worth consolidating.
If you are unable to trace your old pension, you can also use the government’s Pension Tracing Service via gov.uk. However, this isn’t a speedy option and it may take some time to track down old pensions, so it may be worth going through old paperwork to see if you can find the details yourself first.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Laura Miller is an experienced financial and business journalist. Formerly on staff at the Daily Telegraph, her freelance work now appears in the money pages of all the national newspapers. She endeavours to make money issues easy to understand for everyone, and to do justice to the people who regularly trust her to tell their stories. She lives by the sea in Aberystwyth. You can find her tweeting @thatlaurawrites
-
‘I installed a heat pump in my home – here are five things I’ve learnt’
From the size and noise of a heat pump to how much it costs to run one, Ruth Emery reveals what she’s learnt after installing one in her home six months ago
-
3 ways to work out if a stock is good value
The only thing you can really control in investing is the price you pay for an asset – but how can you tell if you’re getting a good deal when it comes to the price of a stock?
-
State pension triple lock at risk as cost balloons
The cost of the state pension triple lock could be far higher than expected due to record wage growth. Will the government keep the policy in place in 2024?
-
Midlife MOT: what is it and who can get one?
The government has launched an online midlife MOT to help older workers with financial planning, health guidance and career skills. But how does it work, who can get one and would you pass it?
-
Small pension pots to be consolidated, says DWP
Workplace pension schemes worth less than £1,000 that become “deferred” when a saver changes jobs will be consolidated under a new system
-
Retiring abroad: What to consider, from tax to pensions
The high cost of living makes many people consider retiring abroad. We look at what you need to consider, including tax and pensions.
-
7 pension mistakes to avoid before you retire
These are the 7 pensions mistakes you could be making - and how to avoid them
-
How much state pension will I get?
There are several things that determine how much state pension you'll get when you hit state pension age. Here's how to work out your entitlement
-
How much will it cost you to retire early?
Analysis The pre-state pension income gap means couples may need an extra £136,000 if they want to retire at 60 – can you afford to retire early?
-
When can you retire?
Analysis An opaque outlook for the official state-pension age makes planning harder.