Chancellor announces exploration of one pot for life reforms

The Chancellor announced on 1 November 2023, during the Autumn Statement, that the Government will explore the potential for reforms to allow people to choose their own pension scheme for automatic enrolment, rather than join their employer's default arrangement¹. The government has launched a call for evidence on this new pension model, which would allow people to have one "pension pot for life"¹.

Under current rules, UK companies are required to set up a pension scheme for employees, which means many people build up multiple pensions throughout their career, with a growing risk of those pots becoming "lost"¹. Since the introduction of automatic enrolment in 2012, nearly 11 million people have been enrolled in a workplace pension, many for the first time, and the rules stipulate that every time someone changes jobs they are enrolled into a defined contribution pension scheme at the new workplace¹. The average worker builds up 12 pensions in their life¹.

The announcement sits alongside other measures in the pipeline. In the Autumn Statement, the Department for Work and Pensions confirmed it would go ahead with plans to tackle lost pension pots with a multiple default consolidator¹. Under that plan, workplace pensions worth less than £1,000 which have had no active contributions for 12 months will be automatically transferred to an authorised consolidator, with proposals due to be published in late 2024¹. Separately, the pensions dashboard programme, designed to let people see all their pensions in one place, has faced significant delays, with the deadline for schemes to connect now set for 31 October 2026¹.

Why it matters for households

People who change jobs repeatedly are the group most affected by the current arrangement, because each new employer enrols them into a different scheme¹. A pot for life model would change where future contributions go, though the call for evidence is about exploring the idea rather than setting out final rules, and no implementation date has been reported¹. The consolidator plan concerns a narrower group: savers with small pots under £1,000 that have been dormant for 12 months, whose money would move to an authorised consolidator once proposals are published¹. The dashboard delay to 31 October 2026 pushes back the point at which savers can expect to view all their pensions, including the State Pension, in one online place¹.

Consolidating pots is not straightforward, and the questions savers face include the type of pension held, charges, guaranteed annuity rates, pot size, exit penalties and scam risk¹. On charges, annual management charges under auto-enrolment rules are capped at 0.75%, with average charges around 0.5% and as low as 0.2% to 0.3% in some workplace schemes, while pensions predating auto-enrolment can carry charges above 0.75%¹. Some older pensions apply exit charges, which can be as much as 10%¹. On scam protection, the Department for Work and Pensions introduced a "red" and "amber" warning flag system in 2021¹. Of the 290,000 pension transfers in 2022 reviewed by the Financial Conduct Authority, 2,400 were given at least one amber flag and 300 were given at least one red flag¹. Four in 10 pension savers are unsure whether they should consolidate their retirement pots, according to a survey by investment firm Hargreaves Lansdown¹.

What happens next

The call for evidence on the pot for life model is open¹. Proposals for the multiple default consolidator are due to be published in late 2024¹. The deadline for pension schemes to connect to pensions dashboards is 31 October 2026¹.