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.