The Society of Pension Professionals has submitted its response to the Department for Work and Pensions discussion paper on key elements of the scale policy, warning that an extended regulatory timeline risks creating paralysis in industry planning, stifling innovation, and compressing execution risk as the policy deadline approaches.
The scale test, passed as part of the Pension Schemes Act this year, pushes for the creation of ‘megafund’ defined contribution schemes with at least £25bn within a default fund by 2030.
While welcoming the government’s ambition to harness scale for DC pension schemes, the SPP highlighted what it claimed were critical areas requiring urgent regulatory clarity and greater flexibility, particularly regarding the definition of common investment strategies and the measurement of scheme scale.
Additionally, The DWP’s proposal to wait until late 2027 for draft regulations creates a “prolonged period of uncertainty”, the SPP claimed.
However, the SPP supports assets under management as the core scale metric, provided that clear operational guidelines exist for valuations, illiquids, and market volatility.
Chris Austin, chair of the SPP Investment Committee, says: “While the SPP understands the government’s goal of leveraging scale to deliver better outcomes for pension savers, clarity and speed are paramount, waiting until late 2027 for draft regulations leaves the industry in limbo, threatening to stall vital investment and stifle innovation at a time when providers should be preparing for the 2030 deadline.
“Furthermore, scale cannot be a one-size-fits-all exercise. An overly rigid, age-only definition of investment strategies risks penalising engaged employers, undermining guided retirement pathways, and cutting off essential choices like Sharia-compliant or ESG-focused funds.”
SPP is the representative body for a range of providers of advice and services to pension schemes, trustees and employers.