Pensions Bill: “We welcome the ambition to help DC schemes fulfil their potential, but there are risks in a market dominated by megafunds”

Commenting on the detail in relation to DC schemes outlined in today’s Pensions Bill, Lydia Fearn, Co-Head of Consolidation, LCP said:

"The Government’s Pensions Bill for DC puts ‘scale’ at the heart of solving today’s pension challenges, positioning consolidation as the key to driving better outcomes for members and unlocking economic growth.

"We welcome the ambition to help DC schemes fulfil their potential, but there are risks in a market dominated by mega funds, particularly around competition and member choice. It’s reassuring to see exemptions and a new pathway for smaller providers aimed at maintaining diversity in the market, though their success will depend on how they work in practice.

"A notable addition in the Bill was the time-limited nature of powers to mandate investment in specific asset classes, which is not extendable after 31 December 2035. Potentially limiting future government influence over asset allocation.

"The detail behind the new Value for Money framework is also a welcome development. A broader “not delivering” rating" and clearer accountability will bring sharper focus to schemes of all sizes, helping ensure consolidation delivers real benefits for members and not just scale for scale’s sake.

"As the pensions system shifts towards fewer, larger schemes, the risks within it will change. It’s encouraging to see DWP acknowledge this and commit to evolving regulation to meet those new challenges."