The Department for Work and Pensions (DWP) published its updated pensions roadmap earlier this month. The consolidation timeline is clear. What is also visible, for anyone looking closely at the detail, is how little progress has been made on the innovation pathway that is planned to sit alongside it.
Perhaps lessons can be learned from Formula One, the most innovative sport on earth. Every tenth of a second matters competitively, which means innovation is not optional – it is existential. And what makes F1’s innovation genuinely excellent is not just engineering budget. It is the tension between established knowledge and new thinking, within a regulatory framework designed to keep competition real.
The government’s answer to the question in this headline, embedded in the Pension Schemes Act 2026, is scale. Defined contribution (DC) multi-employer schemes must reach £25bn in a single main default arrangement by 2030. The logic is familiar: bigger schemes have more buying power, lower costs, and greater investment capability. Size equals quality.
It is worth asking what F1 would make of that argument. Faced with the largest teams threatening to make the sport processional through sheer resource advantage, the FIA (Formula One’s governing body) introduced a budget cap: a ceiling designed to ensure that scale alone could not determine the outcome. The £25bn scale test is the structural opposite – not a ceiling but a floor, not a mechanism to level the competitive field but one that sets a minimum entry requirement only established players can currently meet.
But the more important question is not whether the scale test is the right tool. It is what we risk losing if we do not actively protect what makes the DC market genuinely innovative and competitive.
Old names, new challengers
F1’s excellence has never come from the established order alone. Ferrari and McLaren bring decades of engineering knowledge, institutional depth and a track record that cannot be replicated quickly. That heritage has genuine value. But it was Red Bull, entering in 2005 without fifty years of accumulated habit, that rewrote what a competitive team could look like. Different thinking, different methods, different results. And when Cadillac wanted to join the grid for 2026, the FIA allowed it – not out of sentiment, but because it understood that new entrants are what stops established teams from getting comfortable.
The DC pensions market has had exactly the same dynamic. Long-established providers bring scale, client relationships and technical depth that genuinely matters. But the most interesting developments have not all come from the largest players. Innovative providers have moved faster on member engagement, retirement income design and technology precisely because they have to. The same is true in investment design: new approaches to private market access, more sophisticated default strategies and performance-driven structures that challenge established orthodoxy have emerged from outside the largest players. That competitive pressure is not a side effect of the market. It is the mechanism that drives it forward.
A market that consolidates to five or six megafunds does not lose scale. It risks losing that pressure.
The pathway that does not reach the people who need it now
The Act recognised the risk and included what it calls a new entrant pathway, designed for schemes offering “innovative product design” that is materially different from existing market participants. The intent is right. But the design and timing has a significant gap.
The new entrant pathway is proposed explicitly for schemes with no existing members. The DWP’s own guidance states plainly: “Existing schemes that consider themselves as ‘new’ should be looking at the transition pathway.” And the transition pathway requires £10bn in assets by 2030 to qualify.
Which leaves existing innovative schemes – those already operating, already building something genuinely different, already serving members – with no route at all if they are below the £10bn threshold.
The new entrant pathway may allow future competition. It does nothing for the innovators thinking about their future in this market right now. What is needed is a genuine innovation pathway – one that covers existing schemes with a genuinely differentiated proposition alongside those starting from scratch.
What can we learn from F1?
When Cadillac applied to join the F1 grid, the FIA ran a rigorous, multi-stage process. The assessment criteria were: technical capabilities and resources, the ability to fund participation at a competitive level on a sustainable basis, and the experience and human resources to compete. The FIA also asked applicants to address sustainability plans and demonstrate a positive societal impact.
Notably absent from those criteria: you must already be the size of Ferrari, or have an ambition to get there.
The FIA assessed capability, potential and sustainability of outcomes. It asked whether Cadillac could compete at the required level and grow to do so sustainably. That is exactly the right model for a genuine DC innovation pathway. Assess whether a scheme has a genuinely differentiated proposition and the governance and investment capability to deliver good member outcomes. Not whether it has already cleared an asset threshold that is, by definition, beyond the reach of any innovative or newer player.
That is the distinction between a size test and an outcomes test. The Value for Money (VfM) framework is already built on the latter. A genuine innovation pathway should be too.
A pit stop that comes too late
The government has committed to publishing a report on the effects of consolidation on innovative product design, due in April-June 2027, ahead of the scale regulations consultation later that year. That sequencing is deliberate: examine the effects, then design the detail. The intent is reasonable.
But there is a serious risk the review arrives too late to reflect the market as it should be.
Innovative players already in the market cannot plan, invest or grow with confidence while the pathway remains undefined. Potential new entrants will not commit capital to a market whose operating rules are unknown. The uncertainty is doing damage now, compressing the competitive field before the scale threshold has even been applied.
By the time the 2027 review examines the effects of consolidation on innovation, some of those effects will already be irreversible. Schemes that might have grown into genuine competitors will have consolidated or exited. New entrants that might have brought different thinking will have waited, assessed the uncertainty, and gone elsewhere. The review will reflect a market already shaped by the absence of the pathway it was planned to inform.
It becomes self-defeating: the government cannot design a pathway to protect competition from evidence gathered after competition has already been curtailed. The review needs a functioning market to assess. That requires defining the pathway before the evidence disappears, not after.
The innovation pathway the market actually needs
The scale test is not going away, and this article is not arguing it should. The consolidation direction is set and the Act has Royal Assent.
But a consolidated market without meaningful competitive tension is not a reform. It is a restructuring. Whether the DC market that emerges from 2030 delivers genuinely better outcomes for members, or delivers increasingly homogenous provision from a small number of large players under limited pressure to improve, depends on whether that market retains real competitive challenge.
A genuine innovation pathway – assessed on capability and outcomes rather than asset size, covering existing innovative players as well as genuinely new entrants, and grounded in the same logic as the VfM framework the government is already building – is the mechanism that provides that challenge.
The DWP’s scale policy consultation, open right now and closing 7 September, asks nothing about it. The consolidation review arrives in mid-2027. The regulations consultation follows later that year. If the pathway is not defined until then, it will be designed around a market that has already adjusted to its absence, and a review that has already measured the damage.
The FIA assessed Cadillac on whether it could compete, not on whether it was already the size of an established team. The parallel holds. An innovation pathway grounded in outcomes rather than size, defined before the 2027 review rather than after, should be the logical next step.
The DWP scale policy discussion paper is open for responses until 7 September 2026. A report on the effects of consolidation on innovative product design is due April-June 2027. Scale regulations are expected to be consulted on in late 2027, with the threshold applying from April 2030.