Millions of pension savers could have their retirement pots moved without their consent under sweeping reforms set out in the Pension Schemes Bill.
The Government’s shake-up of the pension system would allow small pension pots to be automatically transferred into designated consolidation schemes, even if the saver has not agreed to the move.
Under proposals published in June 2025, any pension pot worth less than £1,000 that has been inactive for 12 months could be moved to one of a small number of authorised default consolidators.
Ministers say the change is designed to tackle the growing problem of lost and forgotten pension savings that build up when people change jobs and leave small pots behind with former employers.
However, the plans have raised concerns among pension experts who warn millions of savers could see their retirement savings moved without their knowledge.
While the idea of combining scattered pension pots has received broad support across the industry, critics say the proposed one-year inactivity threshold is too short and could create unintended problems for some savers.
Ros Altmann, who served as pensions minister between May 2015 and July 2016, has urged ministers to rethink the proposal.
She said the Government should extend the minimum dormancy period and ensure genuine efforts are made to contact pension holders before their funds are transferred to another scheme.
She described the 12-month window as “far too short a timeline” and called for an extension to two or three years.
The former minister expressed particular concern about the impact on women who may step away from work for more than a year to care for children, only to discover their pension has been moved upon their return.
“Many people will not look at their pension every year especially as we are told that pensions are for the long-term,”Ms Altmann said.
Ros Altmann, who served as pensions minister between May 2015 and July 2016, has urged ministers to rethink the proposal
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GETTY“I believe a much longer time should be allowed, before pension providers can assume a member has ‘lost’ their pot.”
Sir Steve Webb, now a partner at LCP and himself a former pensions minister, concurred that the “Government has got this wrong”.
Mr Webb noted that this challenge was anticipated back in 2014 during his tenure, when he introduced legislation for a “pot follows member” approach that would have seen dormant savings automatically transfer to a worker’s new employer scheme.
His successors failed to implement the system, leaving the issue unaddressed until the current bill emerged.
There are approximately 13 million dormant small pension funds currently in the UK
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GETTY“I think pots should go to your current active pot in your current workplace that’s the one you are most likely to be engaged with,” Mr Webb said.
“Instead, they are going to consolidate your pension to a pension provider you may never have heard of, didn’t choose, and have no relationship with. It’s hard to see how this will help.”
The scale of the dormant pot challenge is substantial, with approximately 13 million small pension funds currently in the UK and roughly one million more accumulating each year.
Rachel Vahey, head of public policy at AJ Bell, highlighted that an estimated 3.3 million pension funds remain unclaimed, representing around £31.1billion in total.
Experts warn the 12-month window is “far too short a timeline”
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GETTY“Automatic consolidation should be a last step, only considered if an ex-employee is unwilling to engage with efforts to reunite them with their funds,” she said.
Craig Rickman, personal finance expert at interactive investor, warned that workers who temporarily halt contributions due to financial pressures could find it “unsettling” to learn their pot has been relocated.
A DWP spokesperson defended the policy, stating the 12-month timeframe “strikes a balance between ensuring pots are genuinely dormant and avoiding delays that could leave people worse off in retirement”.
