The UK pensions industry should be able to deliver small pension pots consolidation by 2030 through a united, industry-delivered model, according to findings from Pensions UK.
The Department for Work and Pensions (DWP) asked Pensions UK to research the technical feasibility of delivering the government’s preferred Multiple Default Consolidator (MDC) model, as set out in the Pension Schemes Bill, to curb the proliferation of small pots.
The review builds on the work of the Small Pots Coordination Group – convened by Pensions UK and the Association of British Insurers (ABI) – and the government-run Small Pots Delivery Group, which highlighted the urgency of tackling the growth of small pots and the need for a pragmatic delivery model.
It assessed three options: a centralised model with central records and processing; a decentralised, industry-led model where schemes and consolidators exchange data directly using agreed standards; and a hybrid ‘technology shield’ model, providing shared functions without holding personal data.
The review concluded that a united, industry-delivered model is the most feasible and cost-effective approach for implementing the Small Pots Data Platform by 2030. This aligns with the DWP’s published roadmap on resolving the small pots issue.
Pensions UK explained that the model would allow pension funds and consolidators to interact directly through agreed data and messaging standards, using existing infrastructure rather than a complex centralised system. Delivery would require strong governance, with regulators also playing their part.
Industry costs are expected to remain proportionate, with ongoing expenditure significantly lower than centralised alternatives, which would impose additional and duplicative costs.
A second phase of work will refine technical standards, governance arrangements, consumer protections and implementation phasing, aligned with secondary legislation.
Throughout the review, pension funds across the trust-based, contract-based and hybrid sectors were consulted, alongside the DWP, the Pensions Regulator (TPR) and the Financial Conduct Authority (FCA), to ensure alignment with legislative requirements and the intent of the Pension Schemes Bill.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said the review shows that a practical solution to combine millions of small pension pots is “within reach”.
She said the model “delivers value for members, enables schemes to operate effectively, and ensures policy objectives are met”.
“By working together, government, regulators, and industry can deliver consolidation in a way that is efficient, fair, and beneficial for millions of savers,” Alexander added.
The report findings were welcomed by pensions minister Torsten Bell, who said they underline the government’s commitment to working with industry to resolve the issue.
He said: “Alongside progress on dashboards, tackling small pots is a crucial step to help millions of people stay connected to their savings and improve their retirement security.”
Lizzy Holliday, director of public affairs and policy at Now: Pensions, added that the report is “an important step forward in showing the multiple default consolidator solution for small pots, as outlined in the Pension Schemes Bill, is possible and practical from a technology point of view”.
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