Jerry Butcher, Workplace Savings Director, Scottish Widows
The UK pensions market is moving decisively towards consolidation. Policymakers and regulators have made clear that the future lies in fewer, larger and better-run schemes – not simply for the sake of efficiency, but because scale is increasingly seen as a route to better member outcomes.
That direction of travel reflects the reality of the market today. The Pensions Regulator's latest DC landscape analysis shows the number of occupational defined contribution (DC) schemes continues to fall (down 15% to 790 in 2025), while assets increased by 22%, from £205 billion to £249 billion1. Far from being a future trend, consolidation is already well underway.
The headline benefits of consolidation are typically said to relate to providers' ability to access a broader range of investment opportunities, including private markets which are increasingly seen as an important part of long-term retirement savings strategies.
That access to private markets is a key objective of recent government reforms and industry initiatives.
What are the benefits?
At Scottish Widows we look after in excess of £130bn retirement assets for 4.8m members across both trust-based and contract-based schemes, with over £80bn in our main default fund. We are also part of Lloyds Banking Group, with over 38m retail customers in total. By any measure, we are clearly ‘at scale'.
I see four key benefits of this.
First, technology. Developing sophisticated digital experiences, personalised communications and AI-enabled support require deep specialists. Larger providers are often better placed to sustain these capabilities. We have our own resources and can also draw on teams across Lloyds Banking Group – for example in building our AI Invest agent in the Scottish Widows app, which helps customers to understand investing and pension saving.
The same is true for other specialist areas such as cyber-security.
Second, ongoing investment in the proposition. The fixed costs of running a workplace pensions business are high, and pricing is competitive, so it can be challenging for smaller players to commit to development spend to improve propositions and experience for customers. We have invested over £200m in our workplace business over the past three years, with the scale to be able to sustain this level of investment in future.
Third, investing. By virtue of scale, larger providers can maintain larger investment teams and access the best fund managers at highly competitive charges, supporting better value for customers. Scale also becomes increasingly important in private markets investing, for example by enabling access to attractive co-investment opportunities, where there is typically a minimum ticket size.
Fourth, security. There are a few aspects to this. Generally, clients can take comfort from the longevity, credibility and balance sheets that larger providers can bring. This gives assurance that the provider will have the appropriate resources in place – not just today, but for the long term.
This matters for all clients, but particularly for larger schemes. We are currently completing the onboarding of the largest-ever scheme to move into a Master Trust (with over 100k members and £7bn in assets).
Very large, complex clients of this nature often need specific solutions such as support for international movers, or tailored engagement for different membership cohorts. It is unlikely that a smaller provider would have been able to commit the resources and balance sheet to manage this.
Does bigger automatically mean better?
While there can be a tendency to assume that bigger automatically means better, the reality is more nuanced.
In practice, culture eats scale for breakfast (to adapt a well-known phrase). It is more important that providers have a strong member outcome-focus, encourage dynamism and innovation, and operate with strong governance and controls.
These cultural attributes can exist in both large and small organisations, with clarity of strategic approach, quality of leadership and openness to member and client feedback being key.
The suggestion that members and employers can feel removed from decision making in a bigger scheme is a valid one, but it doesn't have to be the case.
During our recent large-scheme onboarding activity, trustee and member engagement was just as important as operational delivery. In fact, feedback directly shaped elements of the transition.
Scale can also come with significant complexity. Providers that have grown through acquisition or partnerships can have extremely fragmented operating models that make it expensive and time consuming to deliver change.
It is always worth looking underneath the bonnet to understand if there are actually two or three smaller businesses operating alongside each other. At Scottish Widows we spent several years fully integrating our acquisition of Zurich's workplace savings business and are now harvesting the benefits.
In a similar vein, larger providers can operate with multiple default investment solutions. On the one hand, flexibility and tailoring can be positive. At the same time, it is important to ensure that all defaults remain governed and reflect the latest and best investment thinking.
We have taken a proactive approach here – maintaining a consistent main default (with over £80bn in assets) even as we have modernised our asset allocation, ESG approach, and de-risking strategy over the past 18 months.
What about the concern that consolidation could reduce diversity across the market? As assets become concentrated within a smaller number of scale providers, could investment approaches, product design and member experiences become increasingly standardised?
Competition has historically been a driver of innovation, and a more concentrated market could diminish this over time.
I generally see this risk as manageable, particularly if one looks at broader competition and innovation across the wider financial services and fintech system.
However, we ought to guard carefully against the risk of investment ‘herding' (where providers all follow the same asset allocation approach), particularly in the context of Mansion House and Value for Money.
Delivering better outcomes through scale
In summary, scale alone is not a strategy for success. The benefits of scale only apply if providers complete the hard yards of simplifying their business models with strategic focus, robust governance, and a culture that supports change, alongside investment expertise and a relentless focus on engaging members.
Sources:
1 Master trusts dominate as smaller schemes continue to exit the defined contribution (DC) market, new TPR data reveals, The Pensions Regulator. March 2026.
DC consolidation and economies of scale: emerging evidence, The Pensions Regulator. May 2026.
