The Department for Work and Pensions (DWP) has published a consultation on the automatic consolidation of deferred small pension pots through the introduction of consolidator schemes.

The implementation of the ‘Multiple Default Consolidator’ model aims to address the rising number of deferred pots in the defined contribution (DC) pensions market.

Through the Pension Schemes Act 2026, the government has established a legal framework to introduce to Multiple Default Consolidator solution, with the consultation seeking views on proposals to support the regime’s operation.

Its consultation included the eligibility criteria for schemes and pots within scope, including the treatment of pots with guarantees, and proposals for the establishment of the required infrastructure to enable pot matching and consolidator allocation.

The Pensions Regulator (TPR) will oversee the authorisation regime, which is included in the consultation, for trust-based schemes to act as consolidator schemes, while provisions for the Financial Conduct Authority (FCA) to make rules for contract-based schemes were also covered.

The consultation also sought views on the supervisory framework and enforcement powers available to regulators, information requirements for members, and new duties for employers to provide relevant information to schemes.

A further consultation, expected in late 2027 or early 2028, will cover the detailed requirements for ceding schemes, the supervisory approach for those schemes, finalised data standards, and outstanding elements of the broader framework.

Implementation and delivery timelines will be set out “in due course”, the DWP said.

Under the proposals, eligible pots must have received no contributions for a period of at least the previous 12 months and have a value of £1,000 or less.

The DWP estimated that this would bring around 20 million small dormant pots into scope at the point of implementation in 2030.

“Across the workplace pensions market today, there are around 13 million deferred small pension pots – and that number is growing by more than a million every year,” said Pensions Minister, Torsten Bell.

“This proliferation of pots is not just a trend; it’s a structural inefficiency. We estimate it costs the industry £240m annually in administration – costs that ultimately fall on members.

“Over recent years, working closely with the pensions industry, we’ve built a strong consensus on the way forward. That’s why, through the Pension Schemes Act 2026, the government took powers to introduce a Multiple Default Consolidator solution.

“Now is the time to turn that vision into reality. This consultation sets out the building blocks of the policy, from how consolidator schemes will be authorised, to the digital infrastructure that will underpin the model.

“Our ambition is clear: to have small pot consolidation operational from 2030.”

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