That is a fair question. The most prevalent example will be people whose existing pot, although small, has unusual and valuable guarantees attached to it, or benefits that they would lose if they transferred into the default fund of another provider. That is likely to be the most common use of the Clause. The clause will provide for transparency by allowing regulations to be made to set out in more detail how those decisions and others will take place.

Given the admin costs and unprofitability of small dormant pots, we do not expect schemes to abuse this exemption. For the benefit of people who do not spend lots of time looking at these matters, I should say that lots of schemes are happy to see small pots go, because they are expensive for them to operate; they are neither in the provider’s interest nor in the saver’s. This clause strikes a careful balance.

Clause 24 will ensure that pension savings are not left idle, requiring all eligible pots to be held by a default consolidator. As Members will know, millions of workers accumulate small pension pots as they move between jobs. Specifically, the clause will allow for the transfer of those dormant pots without requiring active consent—again, that is something that Governments do not do lightly, but it is required by the best interests of savers in these cases—where a transfer notice has been issued and no objection received from the member, as I set out in relation to clause 22.

If a member does not opt out, the trustees and managers of the scheme are required to act on the transfer notice and transfer the pot to the designated consolidator. Clause 24 also provides legal certainty, because it will empower schemes to consolidate pots even if doing so breaches existing scheme rules. That removes administrative barriers and places the member’s interest at the heart of the system.

Clause 25 plays a role in providing legal clarity and continuity for individuals whose small dormant pots are transferred. The clause sets out what happens when a pension pot is moved to a different pension scheme or a different arrangement within the current scheme. This ensures that an individual’s membership status, rights and obligations are automatically and seamlessly updated at the point of transfer—so it is not just that a member’s pot has been transferred, but that they have become a member of the scheme that they are entering, even though they have not signed up to a contract explicitly in so doing. This means that they automatically acquire all the rights and responsibilities that come with that membership. In schemes where membership results in a new contractual relationship, the clause will deem that a new contract is formed at the point of transfer.

Clause 26 will play a critical role in ensuring that the transfer of small pots to consolidating schemes is undertaken in a legally robust and administratively efficient manner. By establishing clear timeframes for transfers, it will allow for the safe and effective consolidation of small dormant pension pots.

This clause introduces two key timing rules. First, it mandates the minimum 30-day notice period before any transfer or change of arrangement can take place. That gives individuals the opportunity to review the proposal and respond. That time period is aligned to the approach taken for members who wish to opt out of automatic enrolment.

Secondly, the clause sets out a maximum one-year deadline for completion of the transfer or change of arrangement. It provides clarity and operational certainty for pension schemes and savers. That also enables schemes to maximise the use of bulk transfers, supporting a lower-cost and more efficient transfer process, rather than having shorter deadlines that force them to move individuals in small batches. It also ensures that the small pots consolidation framework remains responsive and co-ordinated. If trustees and scheme managers are waiting for proposals from the small pots data platform, the transfer period can be extended. This clause strikes the right balance by protecting savers and making sure they have time to act, while also providing an impetus for timely action in the consolidation process.

I am grateful to members of the Committee for listening to all those points, and I commend clauses 21 to 26.