Reforms to tackle small pension pot problem, new rules for banks wanting to close accounts, and legislation to be introduced for cryptoassets
Today we place a focus on the government’s plans to tackle the problem of small pension pots and the management costs they create, plus banks are to follow new guidelines around the closure of bank accounts, and how cryptoassets will be subject to new legislation.
New Reforms Aim to Tackle the Growing Problem of Small Pension Pots
The government has announced plans to address the growing issue of small, forgotten pension pots – a problem affecting millions of workers who change jobs frequently and accumulate multiple small pensions over time.
Currently, there are around 13 million small pension pots in the UK, each worth £1,000 or less. That number is growing by about one million a year. For savers, this means difficulty in keeping track of retirement savings and can mean paying multiple flat rate charges which leads to lower returns. Problems are caused for the pensions industry too; they estimate that the administrative costs of managing these small pots could be as much as £225 million a year.
What’s Changing?
Under reforms being introduced through the Pension Schemes Bill, small pots will be automatically consolidated into a single pension scheme that meets certain standards – including providing good value for savers. Individuals will still have the right to opt out if they wish.
This “pot for life” approach is expected to:
- Cut down on flat rate fees applied to each small pot.
- Make it easier for savers to manage their pensions.
- Reduce admin costs for pension providers.
- Improve long-term returns – the government estimates that the pension of an average earner could be boosted by around £1,000.
How It Will Work
Key features of the proposed system include:
- A Small Pots Data Platform to help identify and match savers’ small pots.
- Clear criteria for what qualifies as a “consolidator” scheme (including good value, scale, and consumer protection).
- An opt-out option for savers who prefer not to consolidate their pots.
Industry Reaction
The proposals have received broad support from across the pensions sector. Organisations such as the Pensions and Lifetime Savings Association, Which?, and leading pension providers have welcomed the move, saying it will reduce complexity and help people get better outcomes from their savings.
What to Watch For
The Pension Schemes Bill is due to be introduced to Parliament later this spring. If passed, it will mark a significant shift in how pensions are managed, particularly for workers with multiple jobs over their careers.
Employers may want to start reviewing how the reforms could affect their workplace schemes and communications with staff.
If you have pension pots with various providers, then there could be value in consolidating them even if their value is more than £1,000.
New Rules Aim to Curb Sudden Bank Account Closures
From April 2026, banks and payment service providers will face stricter rules around how and when they can close customer accounts, under new legislation aimed at improving transparency and giving people and small businesses more time to respond to account closures.
The changes mean that:
- Customers must be given at least 90 days’ notice before their account is closed or a payment service is terminated – up from the current 60 days.
- A written explanation must be provided, outlining why the account is being closed. This is intended to help customers challenge the decision, including through the Financial Ombudsman Service if necessary.
These new protections are expected to apply to contracts agreed from 28 April 2026, and are part of a wider government plan to give people and businesses more certainty and security when it comes to accessing banking services.
Why It Matters for Businesses
Small business owners in particular have raised concerns in recent years about accounts being shut down with little or no warning, often without a clear explanation. Clearly this is very disruptive and has left businesses with no time to complain or find a replacement bank.
The new rules should help to improve matters. There will however still be some exceptions – for example, where account closure is necessary for financial crime prevention.
Therefore, it’s worth being aware of these upcoming changes. While they don’t come into force until 2026, they could influence how banks handle account management going forward.
See: https://www.gov.uk/government/news/millions-of-people-and-businesses-protected-against-debanking
Cryptoasset Firms Face New Rules Under UK’s Draft Legislation
The UK government has published draft legislation that would bring cryptoasset services such as exchanges, brokers and custody providers within the scope of financial regulation for the first time. The announcement was made by the Chancellor during a major summit in London as part of UK Fintech Week.
If passed, the rules will apply to firms offering crypto-related services to UK customers – whether based in the UK or overseas. These businesses would be required to meet defined standards around transparency, customer protection, and operational resilience, similar to those in traditional financial services.
The legislation follows a 2023 Treasury consultation, and forms part of the government’s wider “Plan for Change” strategy aimed at supporting innovation in financial services. The goal is to create a more stable and secure environment for consumers, while ensuring the UK remains a centre for digital finance.
Background and Impact
According to Financial Conduct Authority (FCA) research, around 12% of UK adults currently own or have owned cryptoassets – a sharp increase from 4% in 2021. While crypto adoption has grown, the sector has also seen high-profile failures and scams, which has naturally raised concerns.
In practical terms, crypto businesses targeting UK customers will likely face new compliance requirements and potential oversight from regulators like the FCA.
International Cooperation
The Chancellor also noted plans for further engagement with US regulators, including discussions on a potential “transatlantic sandbox” to explore cross-border approaches to digital securities. This follows meetings in Washington between UK and US officials earlier this year.
What’s Next?
The government is seeking feedback on the draft legislation before introducing final measures. The Chancellor also announced that the government will be publishing a Financial Services Growth and Competitiveness Strategy on 15 July alongside the Chancellor’s Mansion House speech. This has the aim of supporting long term growth in the financial services sector.
The regulatory shift is significant for any business involved in or considering entry into the crypto space.
See: https://www.gov.uk/government/news/new-cryptoasset-rules-to-drive-growth-and-protect-consumers