Labour explains major change to pensions as new £1,000 rule comes in

Labour has provided an update on a key change to pensions policy that is soon coming in. It was announced after Conservative MP Richard Holden asked the Government in a written question about what plans they have to change the law so "customers can access pension pot consolidation more quickly". Pensions minister Torsten Bell issued a response to explain some changes that are under way.

The Labour MP said: "The Government is committed to the consolidation of small workplace pension pots, when in the best interests of savers." He mentioned the Pension Schemes Bill 2025, introduced before Parliament in June, which includes measures "to address the growing issue of deferred small pots".

A deferred pension is when a person decides to put off claiming their pension until later in life, which means their investment pot has more time to grow. Mr Bell said people often end up deferring their pension as a person accumulates several pension pots as they change jobs over their working life.

Speaking about what measures will be brought in under the Pension Schemes Bill to tackle the issue, Mr Bell said: "This will ensure workplace pension pots, initially worth £1,000 or less are automatically consolidated, unless members choose to opt-out.

"This will address the 13 million stock of deferred small pots, and any future small pots that are created." The minister went on to explain that people can take action to consolidate their pensions themselves.

He said: "Currently, individuals can transfer and consolidate their pension pots themselves through a member-initiated transfer. This will also soon be aided by the introduction of pensions dashboards.

"Once launched, pensions dashboards will allow people to find and view their pensions, including state pension, securely and in one place online. This will help people to reconnect with each of their pension pots and better plan for retirement."

One risk with having multiple pension pots is you could lose track of some of your retirement savings. A study from last year by the Pensions Policy Institute found the average lost pension pot is worth £9,470, rising to £13,620 for those aged 55 to 75.

The Government website has a tool you can use to try and find the contact details for the provider of a pension you have lost track of.