Bravura’s Proposition Lead EMEA, Jonathan Hawkins, discusses the rapid consolidation of pension providers and schemes and questions whether the FCA’s Value for Money framework remains a relevant benchmark for providers as the industry looks to deliver better retirement outcomes for UK savers.
The way millions of people save for retirement is transforming and so too is the market which serves them. In recent years, the number of defined contribution (DC) pension schemes has shrunk dramatically, driven by regulation, cost pressures, and the rise of master trusts.
Today, fewer providers manage more assets, and the average scheme is significantly larger than just a decade ago. These shifts have prompted a growing debate: is the FCA’s Value for Money (VFM) framework – developed during a time of high market fragmentation – still relevant?
The short answer is yes. In fact, as consolidation reshapes the pensions landscape, the framework’s focus on service, support and member outcomes has never been more essential.
A new market reality
The UK pensions market is changing shape. Between 2012 and 2022, the number of non-micro trust-based DC schemes fell by two-thirds[i], according to the PPI’s report, from 3,660 to just 1,220. Over the same period, the average size of those remaining schemes grew from £6 million to £117m. The master trust segment, in particular, has consolidated at pace. Today, there are just over 30 authorised master trusts – down from over 80 prior to The Pensions Regulator’s authorisation regime in 2018.
This growth in scale is also reflected in asset size. The average master trust now holds £8.8bn1 – triple the amount just a year earlier. These statistics reflect a sector that is maturing. Consolidation has brought improved governance, operational efficiency and better investment access. But size alone doesn’t equate to value.
The changing nature of value
The original purpose of the VFM framework was to improve transparency, ensure competitiveness and encourage schemes to focus on long-term member outcomes – not just keeping fees and costs low. In a highly fragmented market, this made perfect sense. In today’s consolidated market, it still does. But the definition of value is evolving.
Larger schemes now have the scale and resources to do more – offer better digital tools and straight-through transactions, support personalised member journeys, and help savers make more informed retirement decisions. Yet, according to our latest research, Pensions 2045: Voice of the Saver, 75% of workplace savers still lack access to the very tools they want most: retirement income estimators, savings calculators and goal trackers. Meanwhile, 41% of pension providers still rely on letters by post as their primary form of member communication – a far cry from the mobile-first, always-on experiences consumers now expect as default.
Consolidation: challenges and opportunities for providers and members
For providers, consolidation brings both efficiency and exposure. With fewer firms competing for more assets, the pressure is now on to differentiate through service rather than cost alone. Providers must prove they can deliver rich, engaging digital experiences, launch new member services quickly and support a wider range of retirement journeys in real-time.
This is a step change from the past, where scale and price were often sufficient to win business. Add to this the potential upcoming changes to require employers to periodically reassess the provider and scheme they offer to their employees, then this opens up the possibility that legacy providers with substandard offerings will lose out to nimbler, future-focussed competitors.
Alongside this, the reality is that many large schemes continue to wrestle with legacy systems and siloed data. As PASA’s 2024 review of digital administration[ii] makes clear, digital maturity across the industry remains mixed. Automation levels are low, and poor data quality continues to limit progress. In addition, regulatory expectations are rising. Larger schemes are subject to greater scrutiny, particularly under the VFM framework and as part of the UK pensions dashboards rollout. They must not only ensure compliance, but actively demonstrate they are delivering improved member outcomes through their administration, communication and investment strategies.
There are also internal tensions. Providers backed by private equity may struggle to balance long-term service investment with near-term return targets. Likewise, insurance-owned schemes are often required to build detailed business cases for any new spending, which hampers their ability to move quickly, make substantial change, or take risks on new propositions.
For members, consolidation can mean better governance and more robust risk management. Larger schemes often have access to institutional-grade investments and improved oversight. But there are drawbacks. As employer involvement diminishes and schemes become more standardised, members may feel more disconnected from their pension decisions. They may also lose access to tailored services that smaller, employer-sponsored schemes sometimes offered. This homogenisation of propositions could actually lead to worsening “value for money” as higher risk assets are ruled out for fear of those years where they under-perform, and a provider appears to give low VFM in that year (which may affect sales and reputation). This would be similar to some of what is being seen in Australia.
Although transparency and access are improving, especially with pensions dashboards, members are increasingly expected to engage with complex decisions around their retirement – often without the tools, education or confidence to do so.
Dashboards will accelerate the value shift
Pensions dashboards are set to reshape how individuals interact with the providers of their retirement savings. When dashboards arrive, millions of users will get a clear view of all their pension savings for the first time. This visibility is expected to prompt mass consolidation, with savers seeking to simplify their finances and bring all pots under one provider.
In fact, according to our research, more than half of savers (51%) expect to consolidate their pensions once dashboards become available. A further 56% are concerned about having too many small pots to manage, and nearly 60% feel overwhelmed when trying to understand their overall pension position. This has the potential to overwhelm an already automation-strained industry.
The providers that benefit most from this shift won’t necessarily be the ones with the highest returns or lowest fees. Instead, they’ll be the firms that offer the clearest communication, the most intuitive interfaces, the easiest customer journeys, the simplest customer service, and the best support for decision-making. Member experience will be the battleground – with automated, scalable, and digital-first administration giving winners the decisive advantage.
Why automated digital-first matters more than ever
Digital administration and automation is now the bridge between regulatory compliance, operational efficiency, and genuine member value. It enables real-time support, personalised journeys, and the deployment of smart tools at scale. It allows schemes to manage data more effectively, automate key processes, and reduce manual effort – freeing up resources to focus on what really matters: improving retirement outcomes.
But the transition to digital is incredibly far from complete. Most providers have yet to offer even the most basic planning tools to members. Without clean, connected data and flexible infrastructure, many schemes will struggle to meet member expectations – or take full advantage of the opportunities presented by dashboards and open finance.
The VFM framework may have been conceived for a different kind of pensions market, but its core aims – transparency, fairness and outcomes – are more relevant than ever. As the industry consolidates, the responsibility to deliver meaningful value grows. Providers can no longer rely on size alone. Members want more – and they will increasingly vote with their feet.
Those who invest in digital-first automated administration, intelligent support and a compelling member-led experience will be best placed to lead in this new era. Because in the future of UK pensions, value for money won’t just be about cost. It will be about how well a provider supports the individual – every step of the way.
You can access Bravura’s latest research into the UK pensions sector and what technology members want to help improve retirement outcomes by clicking here.
[i] Pensions Policy Institute: Pension scheme assets – how they are invested and how and why they change over time
[ii] PASA: Digital Admin Working Group Unlocking Efficiency: The State of Digital Administration in Pension Schemes
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