Consolidation is one of the Department for Work and Pensions's (DWP) top concerns as it starts talking to pension industry experts about its defined benefit (DB) white paper.
David Weeks, co-chair of the Association of Member Nominated Trustees (AMNT), told FTAdviser the DWP is planning to launch a formal consultation on its DB consolidation in September.
In its defined benefit white paper, the government revealed plans to promote consolidation in the DB pension market, in which two thirds of the 5,600 schemes have funding shortfalls.
Mr Weeks, who had a meeting with government officials this week, said he was concerned about the consolidation models that will arise from the government’s new rules.
He said consolidating small schemes with deficits could create a big pension fund with a significant shortfall. Also, the new scheme won’t have an employer backing it, which would increase the risks.
He said: "The DWP is starting to see the difficulties arising with this topic."
Following the publication of the DWP's white paper Alan Rubenstein, former chief executive of the Pension Protection Fund (PPF), was the first to act by launching the Pension Superfund, which will accept bulk transfers from final salary plans and consolidate them into one occupational pension scheme.
But the new scheme will only take in pension funds that are fully funded.
Mr Weeks said that not taking in schemes with deficits was "one way of providing reassurance".
A second consolidator, Clara, is being created and is expected to come to market in the next few months.
Mr Weeks also revealed the DWP is planning to launch a consultation on The Pensions Regulator's (TPR) new powers later this year.
But the government is awaiting the Work and Pensions select committee report on Carilion to inform this consultation, which is expected in the next coming weeks, he added.
In the white paper the DWP set out a series of new measures for the regulator "to undertake a tougher and more proactive role".
The watchdog will have new powers to fine and prosecute company bosses that put their workers’ final salary pensions at risk.
The DWP confirmed government officials have been meeting pension experts.
A spokesperson said: "As set out in the DB white paper there are a number of areas where the DWP will work with industry, regulators and the charity sector to develop policy proposals.
"Further consultations will take place during the rest of 2018 and into 2019."