Pension Reforms Pose Major Challenges for Administrators, Systems
The government’s proposed small pots reforms will place significant demands on pension administrators, systems, and data, according to the Pensions Management Institute (PMI). The industry has called for an operationally workable consolidation framework to address these challenges.
This warning follows the launch of a government consultation on the governance framework and digital infrastructure needed to implement the proposed small pension pot consolidation regime. The consultation focuses on how consolidator schemes will be authorised, the standards they must meet, and the digital ecosystem required to support the transfer of eligible pots.
Industry welcomes consultation but stresses practical challenges
Helen Forrest Hall, PMI’s chief strategy officer, welcomed the consultation as a step towards addressing a growing problem as automatic enrolment matures. However, she emphasized that the solution must be practically deliverable. Forrest Hall noted that moving millions of small pots between schemes would strain administrators, systems, and data, requiring a framework that is realistically implementable at scale.
“We need an approach that is operationally workable, avoids unnecessary complexity, and gives schemes sufficient time to prepare,” she said. “The ambition is right, but successful reform will ultimately depend on getting the practical detail right.”
Involving schemes in governance and design is key
Angela Staral, chief operating officer at People’s Partnership, also supported the consultation, calling it a critical step towards improving outcomes for millions of savers and creating a more efficient pension system. She stressed that schemes serving the automatic enrolment market, which hold most small pots below £1,000, should be closely involved in designing and governing the proposed infrastructure.
“The schemes serving the automatic enrolment market carry the bulk of small pots below £1,000 and will be the main users of the federated IT solution proposed in the consultation paper to identify and allocate small pots for consolidation,” Staral said. “It is therefore essential that those pension schemes are closely involved in its governance and design.”
The scale of the challenge is significant, with over 13 million deferred pension pots worth less than £1,000 and approximately one million new small pots created each year, according to Lumera. This makes consolidation one of the most significant operational exercises facing the pensions industry.
Federated model offers scalable solution
Maurice Titley, Lumera’s commercial director for data and dashboards, argued that the proposed federated delivery model could provide an efficient and scalable solution. This model allows schemes to handle data exchanges, matching, and transfers within common rules, standards, and governance arrangements.
Titley referenced the 2025 Pensions UK Small Pots Digital Systems Feasibility Review, co-authored by Lumera and KGC, which concluded that a federated model is achievable if the industry establishes common approaches to data standards, messaging standards, and data matching. He sees the consultation as an opportunity to refine these approaches and define the role of the proposed central oversight body.
With the government aiming to make small pot consolidation operational by 2030, Titley believes the consultation provides sufficient direction for the industry to begin preparing. “Schemes and consolidators will need the data, systems and processes in place to support a federated delivery model at scale, including the high volumes of automated matching and transfers that will be required,” he said. “The consultation provides an opportunity to test and refine the standards, governance and operational processes that will ultimately be needed to make consolidation work effectively for millions of savers.”
