Let's tackle the small pension pots problem


Graeme Bold

Graeme Bold

Workplace Pensions Director

Across the defined contribution pension market, there are more than 12 million deferred pension pots worth less than £1,000 no longer being paid into. These small-value pension pots are said to total £4bn in assets.1

Many of these pension pots get ‘lost’ when people move home or job and simply haven’t updated their details with their pension provider. Yet, it’s their pension money and not having it could lead to a poorer retirement, having to rely on benefits, and more difficulty around retirement planning. All these pension pots add to industry costs which, in turn, makes it harder to provide members with value for money.

To tackle this, the UK Government is proposing legislation – announced in July – for a super consolidator model where a small number of authorised schemes will be able to act as consolidators, initially for pots of less than £1,000.1

The largest workplace pension providers in the market will likely choose to be consolidators, helping to sweep up these small pots, along with offering their own pensions dashboards, too.

These regulatory changes will help to transform how people engage with and manage their pension, but they are still a few years away.2

Meanwhile, the proliferation of deferred pension pots continues, and needs addressed sooner rather than later.

£26bn in lost pensions

Last year, the Pensions Policy Institute revealed that the value of lost pension pots had increased by an astonishing £7billion in four years, reaching £26.6billion.3

This is perhaps the inevitable consequence of people changing jobs (on average, people have around 11 jobs over their lifetime).4 and being automatically enrolled each time. They might not be engaged, aware, or confident enough to consolidate their pension pots themselves.

And with every job, and every pension, their savings become more fragmented. 

It just isn’t practical to expect people to consistently keep track of a number of pension pots. Costs are duplicated across multiple pots too, creating inefficiencies and eating into people’s pension savings.

As it usually takes less than a year to build up a pension worth £1,000, many people will still find themselves retiring with a number of pension pots that are just over that financial threshold. 

Members shouldn’t lose out, so the government’s proposed solution will need to evolve to help as many people as possible get the best value for money.

What can we do now to help savers?

Ahead of the proposed dashboard and consolidator regulatory reforms, there’s plenty we can and should do now to tackle the small pots issue. It matters a lot because smaller pots are harder to manage and those who have them are less likely to be engaged with them.  

We know that those with a pot of £100k are twice as likely to be registered for our digital services than those with a pot of £40k. So, we need to make it as easy as possible for people to bring their pensions together and become more engaged with their financial future.  

So, what are we doing at Scottish Widows?  

We are helping people consolidate now. If members want to consolidate their pension pots, we’ve made that easy – and we’ve seen more than £3bn transferred through digital consolidation. Members choose where they want to start their journey – on the web, in their pension app, even in their banking app, and on average it only takes around six minutes to complete.  

A few years ago, a pension transfer needed a seven-page application. Now it takes just seven steps in the Scottish Widows app. The smallest transfer value we’ve received was for £5.79 – now that really is a small pot!  

We’ve also contacted members with small pots that haven’t been paid into for a while and let them know their options. This is something we can scale. 

Ahead of a full dashboard, we are already helping customers stay in touch with their pension. Being part of Lloyds Banking Group means members can see all the pensions they hold with us next to their Lloyds, Halifax, and Bank of Scotland bank accounts. This helps them feel more connected to their pension savings and less likely to lose track of them, as well as being very effective at reuniting thousands of customers who have left employers – and their pensions behind, too. 5  

Later this year, customers will be able to aggregate their pensions from other providers in our Scottish Widows’ app, giving them a single view of all their pensions in one place. It’s a big step towards delivering better value for money and moving to a dashboard-style view. 

Member outcomes matter

Pension provision is on a journey, but progress is slower than ideal. The pension consolidator model is a welcome step along the way, but with pensions dashboards being pushed further out, help for members isn’t coming quickly enough. All the while, we see the proliferation of pension pots and smaller schemes struggling to offer the full range of flexible pension options.

We will be relentless in taking the friction out of the process and consolidating small pots to help savers keep track of their pension in a more manageable way. However, consolidation needs to be right for members (it isn’t right for everyone) and has to represent good value for money. 

Personalised, helpful guidance and simple consolidation tools are the least we can offer to help people make the most of their savings now, before the wide-ranging changes that consolidators and dashboards will bring.

Read more: Ending the proliferation of deferred small pots, 17 July 2023, Gov.uk

Notes to Editor

[1] According to Department for Work and Pensions, Ending the proliferation of deferred small pots.

[2] According to Pensions Dashboards Programme, Lost pensions: what’s the scale and impact?   

[3] According to PPI, Lost pensions 2022: what’s the scale and impact?   

[4] According to ABI, Lost pensions: what’s the scale and impact?

[5] According to gov.uk, Understanding member engagement with workplace pensions.



If you are a UK employer, please visit our employer hub for further information.

Employer hub Go to employer hub



If you are a UK adviser, please visit out adviser site for further information.

Adviser website Go to our adviser website.

For use by UK employers and advisers only.