Trustees must act now on defined contribution (DC) consolidation as delaying decisions could compromise compliance with regulations and the value delivered to members, according to the Pensions Regulator (TPR).
The number of non-micro DC and hybrid schemes fell by 15% over the past year, dropping from 920 in 2024 to 790 in 2025, recent data from the regulator has shown. However, this rate of consolidation needs to continue, TPR indicated, issuing a stark warning to trustees.
TPR emphasised that proactive planning was essential for any scheme hoping to thrive in the evolving DC landscape.
In particular, it warned smaller schemes to urgently assess their future as the Pension Schemes Bill, which introduces further expectations for trustees, moves closer to becoming law.
“Schemes should begin preparing now – including addressing data quality, reviewing governance capacity and exploring transfer or wind-up options.”
Kim Goodall-Brown, TPR
The bill, which is expected to receive Royal Assent in the coming weeks, introduces requirements aimed at raising governance standards and improving value for money. Many of these requirements are tied to the scale and growth of DC pension schemes.
Kim Goodall-Brown, director of DC and master trust supervision at TPR, said: “Both consolidating and winding up can take time, and trustees cannot wait until the Pension Schemes Bill requirements take effect.
“Schemes should begin preparing now – including addressing data quality, reviewing governance capacity and exploring transfer or wind-up options.
“If trustees face challenges or barriers, please get in touch so we can help clarify what the changes mean for your scheme.
“We will continue to communicate with our regulated community as secondary legislation develops – through sector-wide updates and targeted correspondence.”
Other aspects of the Pension Schemes Bill that will affect DC schemes include the provision of default decumulation pathways to help members transition into retirement. In addition, the regulator flagged the rigorous Value for Money assessments that it aims to introduce through work being led by the Financial Conduct Authority.
DC schemes will also soon be expected to be able to facilitate the transfer of small deferred pension pots where no contributions have been received for at least 12 months.
These new duties will substantially increase operational and governance demands, TPR said, making it more difficult for smaller schemes to meet expectations.
Sonya Fraser, partner at Arc Pensions Law, said: “TPR’s latest DC landscape analysis reinforces the direction of travel we have been seeing for some time towards fewer, larger schemes with a focus on good member outcomes. Consolidation is not presented as the only outcome for own-trust DC schemes, but it is clearly being positioned as a credible and, in some cases, necessary option.
“TPR rightly flags that the Pension Schemes Bill will, once enacted, introduce significant new legal duties for trustees of DC schemes and that compliance with the new requirements will prove challenging for smaller DC schemes in particular.
“TPR expects trustees to start exploring their options now and not wait for the new requirements to come into force, given that transfer and winding-up projects inevitably take time to complete.”
