The pensions industry should drive small pension pots consolidation by 2030, trade body Pensions UK has urged.

In its Small Pots Feasibility Review, the organisation looked at how to resolve the issue of small pensions pots.

It pointed out that small pension pots are costly to deliver and confusing for savers.

Torsten Bell, Minister for Pensions, said: “With more small pots than pensioners in the UK, too many people are losing track of their hard-earned savings. This is bad for pensions savers and bad for the pensions system.”

The pension industry has been working with the government to find the best way to combine small pots to deliver the best outcomes.

The DWP asked Pensions UK to research the practical and technical feasibility of delivering the Government’s chosen Multiple Default Consolidator (MDC) model, as set out in the Pension Schemes Bill.

The review followed the work of the Small Pots Coordination Group (convened by Pensions UK and the ABI) and the Government-run Small Pots Delivery Group, which identified the urgency of addressing the proliferation of small pots and the importance of a pragmatic delivery model.

The review concluded that a united, industry-delivered model offers a feasible and cost-effective solution for implementing the Small Pots Data Platform by 2030, which is in line with the DWP’s published Roadmap on resolving the issue of small pensions pots.

The proposed model allows schemes and future consolidators to interact directly through agreed data and messaging standards. Rather than building a complex centralised system, the report proposes using existing infrastructure although it warned that it would require strong governance, including with regulators playing their part.

Pensions UK said that costs are expected to remain proportionate, with ongoing industry expenditure estimated to be significantly lower than centralised alternatives, which would impose additional and duplicative costs.

Looking ahead, the organisation said a second phase of work will be required to refine technical standards, governance arrangements, consumer protections, and implementation phasing, aligned with the passage of secondary legislation.

Zoe Alexander, executive director of policy and advocacy at Pensions UK, said: “This Review shows that a practical solution to combine millions of small pension pots is within reach — one that 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.”