Pensions Bulletin 2026/37

DWP launches small pots consolidator consultation

The DWP has launched a consultation on its proposed framework for consolidating small, dormant workplace pension pots, with the aim of having the new system operational from 2030.

The consultation builds on the high-level structure set out in the Pension Schemes Act 2026 (see our guide) and proposes a multiple default consolidator model, under which eligible small pots would be automatically transferred to an authorised consolidator unless the member opts out or chooses an alternative consolidator.

The Government estimates that there are already more than 13 million deferred pots worth £1,000 or less, collectively holding over £4bn, with the number continuing to grow as automatic enrolment generates new pots when people change jobs. The policy is intended to address the costs and risks associated with pension fragmentation, including duplicated administration, charges and the difficulty members face in keeping track of multiple small pots.

The proposals will apply initially to defined contribution workplace charge-capped default funds created since the introduction of automatic enrolment on 1 October 2012, of £1,000 or less, and where no contribution has been made for at least 12 months. Certain pots, including pre-automatic enrolment pots, self-select investments and religious or values-based arrangements, would initially be excluded.

Consolidators will need to meet prescribed standards and be authorised and supervised by the relevant regulator. The intention is that these regulatory requirements will encourage providers to deliver good outcomes and value for members.

A key part of the proposals is a new digital system for identifying eligible pots and matching them to individuals. This will require accurate and consistent member data across pension schemes and employers.

This consultation also covers other matters such as:

• How to deal with small pots that have guarantees, protected pension ages or other protections.
• Arrangements for Sharia-compliant funds.
• New duties under automatic enrolment for employers to help with data matching, eg requiring employers to request personal email addresses from employees and providing them to pension schemes, as well as keeping key member details periodically updated.

The consultation asks 33 questions and closes on 17 November 2026, with a further consultation currently planned for late 2027/early 2028 which will cover more details.

State pension increases – earnings element of triple lock to bite again?

The Office of National Statistics has published its latest set of earnings data which reveals that the provisional statistic used for the earnings element of the state pension triple lock increased by 3.9%. Should this figure be confirmed around this time in October, it is likely that the state pension will increase by 3.9% in April 2027 given this exceeds the 2.5% fixed element and it seems unlikely that the September price inflation figure will be greater, although it may be a more close run thing than last year, with the August CPI coming in at 3.1%.

LCP partner Steve Webb has commented about this, including about the problems with the government’s approach to the state pension exceeding the income tax personal allowance.

TPR analysis highlights continued DB funding improvements

The Pensions Regulator (TPR) has published its 2026 analysis of DB scheme funding, unsurprisingly showing a significant improvement in funding levels compared to three years ago. The analysis covers 1,540 tranche 19 DB and hybrid schemes, ie those with valuation dates through 22 September 2023 and 21 September 2024 inclusive. Key findings are:

• Some 67% of schemes reported a surplus on their technical provisions basis, compared with 39% in tranche 16, covering the same cohort of schemes at the previous valuation cycle.
• The average (mean) assets to technical provisions liabilities ratio for schemes in tranche 19 was 106% (median: 104%). This compares with 94% (median: 95%) in tranche 16.
• The average (mean) recovery plan length for schemes in deficit was 4 years (median: 3.2 years), with a median end date falling in 2027. For comparison, the average (mean) recovery plan length in tranche 16 was 5.7 years (median: 5 years).

This is expected to be the last edition of TPR's DB funding analysis in its current form. The new DB funding code applies to valuations with effective dates from 22 September 2024, and TPR says it will review how the resulting new data should shape future funding statistics.

See here for commentary by LCP Head of Pensions Developments Jon Forsyth.