The consolidation of the market into 10-15 defined contribution ‘megafunds’ by 2035 will drive better outcomes and facilitate increase in private market allocations, claims a report published by Standard Life.
The report addresses changes due to the consolidation of the pensions space, a shift that is to be accelerated by the ‘scale test’ element of the recently passed Pension Schemes Act. This legislation states that large DC workplace providers and master trusts must have at least £25bn within their default arrangements by 2030, or face the prospect of losing access to auto enrolment contributions.
However, schemes with at least £10bn in their default by this point can apply to enter into a transition pathway scheme, if they can prove a ‘credible’ way towards reaching the target by 2035.
As of September 2025, the Standard Life Master Trust holds £12bn in assets, with this amount expected to increase following completion of its Aegon UK acquisition later this year.
Projections from the Standard Life report, published in in partnership with WPI Economics, looked at shifting DC allocation towards private market investment. It claimed that savers could see their retirement pot grow by up to 20 per cent by this approach, while the UK economy could gain £115bn in GDP.
The UK government can also in theory mandate pension funds to invest greater amount in private assets, as part of legislation also passed into law as part of the Pension Schemes Act.
By 2035, Standard Life also expected schemes will have solved for cost constraints and developed increased sophistication either through large in-house schemes or outsourcing, enabling access to a wider range of investment options which can benefit savers.
The report also set out eight principles supposedly necessary to facilitate a new era of value-focused retirement saving:
- Establishing a clear, consistent and outcome-focused regulatory framework
- Equal levels of protection for all members
- Shifting from a cost-focused to a value-focused approach, enabling investment across a wider range of assets, including private markets
- Ensuring intermediaries drive competition and value
- Strengthening governance through highly skilled trustees
- Aligning pensions with wider economic and industrial strategy
- A system that supports all to save
- Supporting effective and sustainable access to retirement income
Andy Briggs, chief executive of Standard Life, says: “The UK pensions system is at a critical juncture. While auto enrolment has transformed participation, too many people remain at risk of falling short in retirement.
“The next phase must focus on how reforms are implemented in practice, ensuring that pension savings are translated into better outcomes through greater scale and a stronger emphasis on long-term value.”
The report also claimed that greater scale would enable schemes to invest more effectively across a wider range of assets, particularly private markets, where allocations could rise from around 2-4 per cent today to 15-30 per cent during the growth phase in future default funds.
Under the proposed approach, pension pots could also increase by between 4 per cent and 20 per cent at retirement. In addition, an early-career saver could have up to £49,000 more in their pension pot, and a mid-career saver could see up to £17,000 in additional savings.
