TPR research shows 'scale is not a panacea' for good outcomes in DC

The review – DC consolidation and economies of scale: emerging evidence – brings together evidence on the emerging benefits of scale and complements the Department for Work and Pensions' (DWP's) analysis of pension fund investment and the UK economy published in 2024.

LCP said the review included an analysis of costs and fees, an area where the consultant said larger schemes typically perform much better.

But it said the review also looked at investment returns, where LCP said the pattern was "much more mixed".

Commenting on the research, LCP partner and investment expert Sam Cobley said: "TPR's analysis highlights several potential advantages to members of larger pension schemes, including lower per-member costs.

"Larger schemes may also be able to bring investment management in-house, particularly in areas such as private markets, lowering the cost of such asset classes which are likely to be increasingly important as schemes grow and diversify."

Cobley said, however, that the evidence was not all one way.

He said: "TPR notes that single-employer trusts, when supported by appropriate investment advice, tend to have higher average investment returns than the average master trust. More broadly, DWP research found no clear correlation between scheme size and performance for either master trusts or group personal pensions.

"Overall, the analysis shows that whilst there could indeed be benefits to members of moving from smaller schemes to a large master trust, there are also plenty of members who are getting a great outcome by being part of a well-run single employer trust, especially where the employer is meeting the costs of running the scheme.

"It is clear that there is not a one-size-fits-all right answer to what is best in any workplace or for any group of workers and that scale is not a panacea for good outcomes in DC."