Helen Forrest Hall is chief strategy officer at the Pensions Management Institute
The latest of the Pensions Management Institute’s (PMI’s) regular columns says the question is no longer how we regulate schemes, but how we regulate a system.
For years, policymakers and the industry have anticipated defined contribution (DC) consolidation. That future has now arrived. Master trusts now dominate both DC membership and assets, smaller schemes continue to exit the market, and the landscape is increasingly shaped by a small number of large providers. Yet our regulatory framework still reflects an earlier, more fragmented system.
Latest data from The Pensions Regulator (TPR) shows the number of UK DC schemes fell 15 per cent to 790 in 2025, with master trusts holding 92% of members and 83% of DC assets. This is no longer a market of many small schemes; it is a system defined by scale, concentration and growing systemic importance. If we are serious about delivering good outcomes for savers, regulation must evolve to match this new reality.
It is important to recognise that TPR, the Financial Conduct Authority (FCA) and the Department for Work and Pensions (DWP) have long been working to strengthen the system. But at the PMI, we believe this moment provides an opportunity to fundamentally rethink the regulatory model itself.
Consolidation creates the conditions for a more proportionate approach - one that reduces unnecessary burden while strengthening the capability and accountability of those running the UK's largest pension institutions.
In our view, the future lies in regulating people rather than process: placing greater emphasis on the competence, judgement and professional standards of trustees, and less on prescriptive procedural requirements that add cost without always improving outcomes.
Rethinking regulation in a world of megafunds
The informed expectation within the industry is that we could have as few as ten to fifteen dominant megafunds by the mid‑2030s. These entities will be systemically important, and today's oversight mechanisms were not designed for organisations of such scale or complexity.
We therefore need to consider what must change to regulate the future system effectively. Key questions include:
- What enhanced expectations should apply to those serving on the boards of large schemes?
- How do we ensure trustees have the right blend of skills, experience and professional standards to oversee institutions of this scale?
- How should TPR and the FCA coordinate to ensure consistent expectations across pensions and wider financial services?
The trust‑based model remains uniquely valuable, but pensions cannot operate in a vacuum. Other regulated sectors – and international pension systems – offer important lessons on governance, operational resilience and how member perspectives are embedded in decision‑making. Drawing on this cross‑sector learning will help ensure the UK framework remains modern, evidence‑based and globally competitive.
The PMI has long argued for stronger professional standards for those running pension schemes. As the system consolidates, the case for a more structured, capability‑based regulatory model becomes even clearer. If we want to reduce unnecessary process requirements, we must first be confident that the people running these schemes meet consistently high standards, supported by greater regulatory oversight of key appointments.
A regulatory framework built for the wrong market
Much of the current regulatory structure still assumes a market of many schemes rather than a concentrated market dominated by large providers. This risks creating ever‑greater complexity without improving outcomes.
As consolidation continues, regulation should focus on outcomes and scale rather than process for its own sake. A modernised framework should remove unnecessary requirements that add cost but deliver little value, while strengthening expectations of the people and institutions that genuinely drive member outcomes.
A systems‑thinking approach to pensions regulation
The shift to a small number of large providers demands a more explicit systems‑thinking approach. Several dynamics illustrate why:
- Interdependencies are now central. Large master trusts rely on complex networks of administrators, asset managers, insurers and technology providers. Regulation must recognise these interconnections rather than treating schemes as standalone entities.
- Systemic risk is no longer theoretical. Operational failures, cyber incidents or governance breakdowns in a megafund could have market‑wide consequences.
- Feedback loops matter. Employer decisions, consolidation trends and regulatory signals influence one another. Regulation must anticipate these loops rather than react to them.
- Data is now a critical part of system resilience. As schemes scale, the volume and complexity of data increases. A future‑proof regulatory model must focus on data quality, interoperability and real‑time insight.
Systems thinking supports proportionate regulation: by understanding where risks genuinely sit, regulators can remove unnecessary process requirements and focus on the levers that matter.
Looking ahead
What we are witnessing is not just consolidation; it is a structural transformation of the UK pensions system. Regulation cannot evolve incrementally. It must recognise that these institutions increasingly resemble systemically important financial institutions rather than traditional occupational schemes.
The question is no longer how we regulate schemes, but how we regulate a system.
Regulating the new system will mean different – and in some areas tougher expectations of the people running these schemes. Once that modernised model is in place, we can begin to remove unnecessary processes that achieve little but demand time and money.
As mentioned, it's clear that TPR, the FCA and the DWP are committed to strengthening the system. Collectively, we must find the answers, learn from other sectors and strike the right balance to preserve and enhance the trust‑based system we all believe in.
Helen Forrest Hall is chief strategy officer at the PMI
