UK - Pension pots created under auto-enrolment are set to follow workers to each new employer, the UK pensions minister has said.

Speaking as he published the government's response to last year's consultation on small pot consolidation, Steve Webb expressed a preference for the 'pot follows member' model outlined at the time.

This would appear to rule out the idea of selecting aggregator pension schemes - such as the National Employment savings Trust - to absorb any small pots under a certain threshold, due to the dominant position it would grant the funds in question.

With the Department for Work and Pensions (DWP) highlighting that inaction in the wake of auto-enrolment would result in 50m dormant small pots by 2050, Webb said: "We need a system where people build up worthwhile pension pots in one place rather than having lots of small pots all over the place.

"At the moment, every time someone moves to a new job, there is a risk they leave behind a small pension pot they lose track of.

"Our plans will mean individuals get better value for their savings and bigger pensions as a result."

In its consultation response, the department said many within the industry had raised concerns about the "timing and practical challenges" to pot consolidation, with proposals therefore limiting the scope of consolidation to small pots created by automatic enrolment schemes.

The response said: "We agree that defined benefit rights and legacy pots created before automatic enrolment should be out of scope at this stage, that the automatic transfer process for small pots should be unadvised business and that there should be a provision for opt-out."

It added that there was a need to examine other related issues, such as the cost to the industry and how to handle transfers potentially detrimental to pension savers, with respondents divided on what counted as a small pot - with some arguing for the definition to include only pots of less than £2,000 (€2,550).

The issue of detrimental transfers was one of particular concern to the National Association of Pension Funds (NAPF), with its chief executive Joanne Segars stressing the risk posed by automatic transfers into schemes with higher charges and weaker governance structures.

She branded it a "pensions lottery", where members could be automatically transferred into a different scheme without being aware of its impact, and called on the government to reconsider its 'pot follow member' approach.

"A better solution would be to allow people to transfer their pensions into large-scale, low-cost aggregators, which are simpler and better placed to deliver good member outcomes," she said.

The NAPF has long been an advocate of larger-scale defined contribution (DC) schemes, with chairman Mark Hyde Harrison and others repeatedly making the case for super trusts.

However, the DWP said its analysis demonstrated that an aggregator approach would only result in "limited" consolidation, due to the low pot size limit it would have to apply to avoid one or more aggregator schemes distorting the market.

"In addition," it said, "the creation of one or more dormant aggregated pots would be inefficient for the pensions industry. This option fails to deliver against two key reform objectives of promoting member engagement and tackling inefficiency."

The DWP added that the aggregator approach risked leaving members with more than one pension pot, in cases where the aggregator was not the employer's designated pension vehicle, or in instances where potentially more than one aggregator scheme had been appointed.

However, the department said there was "generally" support for many issues surrounding automatic transfers, including being able to opt out of any consolidation, and that it should happen "unadvised".

Additionally, the DWP outlined its vision for a project similar to the Netherlands' Pensions Dashboard - whereby all accrued pension rights could be viewed side by side.

"Some respondents saw it as a solution in itself, whilst others saw it as paving the way for, or complementing, automatic transfer," it said.