The government has promised to help pension savers by automatically merging smaller retirement pots of £1,000 or less accumulated over their working life, but it could be years before the changes are made.

In its Pension Schemes Bill, published on Thursday, the government detailed plans to tackle pension schemes that were delivering poor returns for savers and create “bigger and better” funds. But some of these measures are not expected to take effect before 2030.

Concerns have also been raised that the bill does little to address the issue of millions of people not saving enough for retirement.

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It is hoped that merging smaller pensions will reduce costs and complexity for savers who have built up numerous pots. Scottish Widows, a pensions firm, estimates that the average worker has 11 pension pots at retirement, but those who have changed jobs more frequently can have far more, especially since auto-enrolment was introduced in 2012.

Pete Glancy from Scottish Widows said the news that smaller pots would be automatically “tidied up” was “hugely beneficial for savers.”

There are about 3.29 million “lost pots” which hold an average of £9,470 each, according to the research firm the Pensions Policy Institute.

The bill’s changes would combine smaller pension schemes into “mega-funds” of at least £25 billion to reduce costs, and consolidate local government pension funds into six pools that invest in areas such as infrastructure and clean energy. It is hoped the changes will lead to greater economies of scale and improved returns for savers.

The reforms also give the government the power to force pension funds to invest more in the UK, if they fail to honour a voluntary agreement struck last month to invest at least 5 per cent of their default funds into unlisted UK assets, such as private equity and infrastructure, by 2030.

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Since auto-enrolment was introduced it has meant employees are signed up for a workplace pension if they are aged between 22 and state pension age and earn more than £10,000 a year. They must contribute at least 5 per cent of their earnings and their employer 3 per cent. As people regularly change jobs, these pots can quickly become lost as people lose touch with their old employers.

The chancellor, Rachel Reeves, described the bill as a “game-changer” for the pensions industry and savers. But critics have warned that it fails to address a growing retirement crisis.

Steve Webb, a former pensions minister who now works for the consultancy LCP, said: “It does nothing to address this elephant in the room. Measures such as consolidating tiny pension pots are helpful tidying up measures, but do nothing to tackle the fundamental problem that millions of us simply do not have enough money set aside for our retirement.

“With every passing year this issue goes unaddressed, time is running out for people already well through their working life to have the chance for a decent retirement.”

While auto-enrolment has meant that more people are saving into a pension, they are not necessarily saving enough. Scottish Widows estimates that 39 per cent of savers, 15.3 million people, are at risk of retiring in poverty.

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The trade body the Pensions and Lifetime Savings Association said this week that a couple needed an income of £43,900 a year after tax in retirement for a moderate standard of living, providing they had no housing costs.

In 2023 the previous government passed legislation to reduce the auto-enrolment age from 22 to 18, and remove the lower earnings limit — meaning pension contributions would be made from the first £1 of earnings, rather than the present threshold of £6,240 a year. These two measures could mean £2 billion a year more being saved into pensions, according to government analysis, but they have not yet been implemented.

The new government began a pension review in July, but its first step was to look at where funds were being invested rather than how much people were saving. It said the second phase of its pension review would look at that and would come shortly after the announcement of the pensions bill. The pensions minister Torsten Bell has denied accusations that this phase of the review had been kicked into the long grass.