Pensions minister Steve Webb said: “Instead of having lots of small pension pots all over the place, we want people to have a ‘big fat pot’ which will buy them a better pension.

“We want to make it the norm that when you move job your pension rights can move with you if you wish. This will reduce the costs of providing pensions and will help people to be much more engaged with their pension savings”.

A pot will be eligible for automatic transfer as long as it was created after a “certain date” to be set in regulations, with a size limit of £10,000 that will be subject to review.

The DWP proposed two transfer methods via either a pot-matching solution involving an IT system, or a member-driven approach using a ‘Pensions Transfer Information Document’ which would be handed to new employers like a P45 form.

The department proposed setting standards for automatic transfer schemes through a legal framework, with regulations to specify what information should be given to the member. Individuals will have the right to opt out of the process.

The DWP said a pot will be eligible for automatic transfer either once all contributions have ceased and the individual has left employment, or once all contributions have ceased for a prescribed period.

Webb said the proposals could halve the number of dormant pots created by auto-enrolment, which the DWP estimates could reach 50 million by 2050.

The DWP said introducing automatic transfers would reduce the proportion of people reaching retirement with five or more dormant pots from a quarter to one in thirty.

It said initially transfers will only apply to money purchase schemes, with pension providers and administrators to operate the transfers. The Pensions Regulator will be tasked with policing the system.

The pension minister said the DWP has been working on how to “design and deliver” the system since it confirmed it would pursue ‘pot follows member’ last July.

The proposal will be included in the forthcoming Pensions Bill.