The Pensions Regulator has published data showing that total costs per member generally decrease as size increases within a pension scheme.
Average cost of membership in a small scheme (less than 20,000 members) was more than £40 a year, compared to less than £20 for very large schemes (more than 500,000 members).
TPE also pointed out that while members in smaller schemes are more likely to face higher costs, some cost increases may be justified if they unlock better value assets for members.
The report follows from the publication of the Pension Schemes Act, which includes legislation necessitating that master trust pension schemes have a minimum size of £25 billion within a default fund by 2030.
A previous Department for Work and Pensions report on the DC pensions market concluded that larger schemes are able to negotiate lower service provider fees and can generally operate more efficiently. The DWP analysis also showed that a median earner could have around £3,000 more in their pension pot due to lower charges from moving into a larger master trust.
However, The Pensions Regulator report also referenced the Pension Provider Survey 2024/25, which showed that the median annualised investment performance was higher in single employer trusts than in multi-employer schemes.
Steve Webb, former pensions secretary and now a partner at consultancy Lane Clark & Peacock, says: “Overall, the analysis shows that whilst there could indeed be benefits to members of moving from smaller schemes to a large master trust, there are also plenty of members who are getting a great outcome by being part of a well-run single employer trust.
“It is clear that there is not a one-size-fits-all right answer to what is best in any workplace or for any group of workers and that scale is not a panacea for good outcomes in DC.”
Defined contribution schemes with 5000 members or more currently have 98 per cent of occupational DC assets.
