DC scheme consolidation: why trustees must take action now
New figures from our latest DC landscape analysis show continued consolidation – and smaller schemes must urgently assess their future as the Pension Schemes Bill, which introduces further expectation for trustees, moves closer to becoming law.
DC consolidation continues to accelerate
The DC pensions market is changing rapidly. Our 2025 DC landscape data shows:
- The number of non-micro DC and hybrid schemes fell by 15% in the last year, from 920 in 2024 to 790 in 2025.
- This follows a similar 15% reduction in 2023 to 2024, representing the largest proportional decreases to date.
- Declines are focused almost entirely on schemes with fewer than 5,000 members.
This continuing trend reflects a shift towards fewer, larger schemes that can deliver stronger investment performance, higher governance standards and an improved member experience.
Larger single employer schemes can compare favourably with master trusts and offer benefits such as tailored member engagement, scheme subsidies and bespoke arrangements. But for smaller schemes this is more difficult and is likely to become more so.
For smaller schemes, difficult decisions lie ahead
We recognise that deciding to consolidate is not always straightforward. For many trustees, stepping back from running their scheme feels like a significant decision. However, achieving the best outcomes for members must remain paramount.
However, with the Pension Schemes Bill expected to become legislation soon, smaller schemes must take a clear-eyed look at whether they can continue to meet rising expectations – or whether members would be better served through consolidation or wind up.
Running a smaller scheme is becoming more complex, more demanding and more resource intensive. Trustees need to consider now whether they can continue to meet these higher expectations – or whether members would receive better value through consolidation into a larger scheme with stronger governance and scale.
Key requirements of the Pension Schemes Bill for DC schemes
Once enacted, the Bill will introduce significant new legal duties for trustees providing DC benefits, including:
1. Default guided retirement solutions
Schemes will need to provide a default decumulation pathway to better support members as they transition into retirement.
2. Value for money assessment
Trustees must undertake a new value for money (VFM) assessment of their default arrangements. This will require:
- collecting and publishing prescribed data metrics
- assessing that data
- comparing performance against other schemes or benchmarks
Data collection for the new framework is expected to begin in 2027, meaning trustees must start preparations well ahead of time.
3. Small pot transfers
Automatic enrolment schemes must be able to facilitate transfers of deferred small pots worth £1,000 or less, where no contributions have been received for at least 12 months.
These reforms will significantly increase governance and operational demands on schemes – particularly smaller ones.
Consider whether consolidation or wind up is in your members’ best interests
For many small schemes, meeting the new legal and administrative requirements will be challenging. Larger schemes generally have greater capacity to invest in member communications, data quality, operational resilience and long-term investment strategies.
We strongly encourage trustees of smaller schemes providing DC benefits to assess whether continuing to run the scheme is realistic – or whether members would benefit from consolidation or wind up.
Consolidation
Transferring into a master trust may offer long-term value when taking into account:
- the cost of future compliance
- the administrative burden of new governance requirements
- the potential consequences of breaches
We have published new consolidation guidance to help trustees considering this route.
Wind up
For some schemes, winding up may be the more appropriate and cost-effective option. Our refreshed winding up guidance supports trustees exploring this route.
Start taking action now
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. Please look out for further information.
Kim Goodall-Brown
Director of Defined Contribution and Master Trust Supervision
