Policy makers are doing everything they can to facilitate bulk transfers of defined contribution pensions as part of the broader agenda to deliver larger workplace schemes that hopefully are better value and better run.
The workplace pension market is already seeing significant consolidation with consultants suggesting there may even be an ongoing ‘land grab’ from some master trusts.
Transfers, without member consent, have been allowed in the trust market since 2018 after amendments to the Occupational Pensions Schemes Preservation of Benefits Regulations (1991) and associated TPR guidance.
Now, as set out in the latest Mansion House pension reforms, announced in May 2025, and due to be enacted in the Pension Schemes Bill published in July, bulk transfers of GPPs without members’ consent will also be allowed.
As well as legislation which should pass in 2026, the Government says that the Financial Conduct Authority (FCA) will be consulting on the regulatory details, though when asked by Corporate Adviser, the regulator could give no additional details as yet.
The FCA raised the issue in its consultation on the Value for Money framework in 2024. That paper said: “The Government may choose to explore legislative changes to enable providers to transfer pension savers without consent, internally or to another provider, with appropriate protections built into the process.” That is what is happening.
Law firm Denton’s analysis of the bill included this summation. “The bill introduces a contractual override that enables contract-based pension providers to transfer pension pots out of underperforming and legacy arrangements without obtaining consent from each member if it is in the members’ best interests. Detailed rules on the use of the new regime will be developed by the FCA, including how a ‘best interests test’ is to be formulated.”
TPR insight
The Pensions Regulator spoke to Corporate Adviser on how it sees bulk DC transfers fitting into the wider pension reform programme. “We support the use of bulk transfers in respect of workplace pension schemes where the trustees or managers determine it is in members’ interests, based on a clear assessment of value and governance.
“DC schemes appear to be increasingly using these provisions to consolidate into well-run arrangements, such as authorised master trusts.
“The processes for transfers without member consent enables consolidation where appropriate, but trustees and managers must still carry out robust due diligence and communicate clearly with members.
“We expect the upcoming value for money framework and broader measures in the Pension Schemes Bill to further support this ongoing shift.”
TPR’s own data collated in its Occupational defined contribution landscape in the UK 2024 bears this out.
Non-micro DC and hybrid schemes decreased by 15 per cent, from 1,080 schemes in 2023 to 920 schemes in 2024 while more than £11bn of assets was transferred into DC schemes with more than 5,000 members.
Adviser view
We talked to three corporate advisers to get their perspective on the DC bulk transfer market, what they have learned from the transfers involving trusts and what they expect from the extension to GPPs.
Looking at the market now, Richard Sweetman, senior consultant at Broadstone says: “We are seeing a lot of activity in bulk transfers from own-trust DC schemes to master-trust. This is being driven by the TPR’s desire to see smaller, poorer value, DC schemes winding up and members put into larger schemes that offer better value for members.
“In addition, many smaller hybrid schemes are moving to buy-out of the defined benefit liabilities, and this means that the DC benefits also need to be secured. Often this is by bulk transfer to a master trust.”
Mark Searle, head of DC Investment at XPS Group, says not every scheme is moving. “We continue to see bulk transfers from single-employer trust-based schemes to master trusts. Despite this trend, there are still many trustee boards who have opted to maintain their current arrangements instead of consolidating, with no clear correlation between this decision and the size of the scheme.”
Hymans Robertson senior DC consultant Claire Roarty adds: “We are seeing increased activity with bulk transfers, as more arrangements move to master trusts. Since the launch of the master trust authorisation regime, as well as increased sophistication and innovation within this space, we have seen more own trust schemes moving, largely driven by cost efficiencies and increased value for members. Trustees have to demonstrate they meet their fiduciary duties when agreeing to a bulk transfer without consent, and we have supported many of our trustee clients on this journey.
“In recent years, we have seen some high-profile consolidations and acquisitions between master trusts. Although they are not as frequent, these bulk transfers are of a large scale and complex, with a significant impact on members. The suitability of bulk transfers of this nature must be demonstrated to The Pensions Regulator.”
Sweetman says that the market is competitive and may be witnessing something of a landgrab.
“We see very attractive terms and charges being offered by master-trust providers. It is unclear why this dynamic is coming through, but it may be that some providers are making a ‘land grab’ for assets in anticipation of the new ‘mega fund’ legislation.
Contract challenges
Considering the current situation in terms of contract-based arrangements, he adds: “Technically ‘bulk transfers’ are not typically available for contract-based arrangements and so for a change of provider following a market review, there is often a coordinated ‘direct offer’ exercise that streamlines an individual member’s decision to transfer to the new arrangement. This is usually for active employees only and not usually extended to past employees who may retain an entitlement in the old GPP arrangement.”
Roarty does foresee the forthcoming regulatory change bringing more transfers into master trusts from GPPs. She says: “GPPs will be able to allow bulk transfers without consent, and we expect this will open the gates for transfers from GPPs, likely into master trusts. We expect many employers and providers to ‘clean up’ their pensions if they have legacy arrangements where members couldn’t previously be moved or to be forced to do this through VFM requirements.”
But it may not all be plain sailing, and a ‘bigger is better’ system may not always be in members’ interests according to some experts.
Searle adds: “Within contract-based arrangements, there are several costly, legacy arrangements where transferring to another setup would be in the members’ best interests, delivering higher expected outcomes. Consequently, increased flexibility in transferring contract-based schemes will boost bulk transfer activities by the providers themselves.
“While we do not anticipate significant downsides resulting from this trend, we remain cautious about the potential logistical and operational challenges posed by fewer, larger schemes. This may also lead to a more one-size-fits-all approach, potentially neglecting individual needs and reducing innovation and competition in the market.”
Sweetman adds: “The proposed ‘value for money’ measures, when combined with the ‘contractual override’, holds out the promise of allowing poor value GPPs to be transferred to better quality arrangements – for both current actively contributing members but also those past members with stranded pots.
“The legislation envisages that it is the ‘provider’, typically the insurance company that operates the GPP that will instigate the bulk transfer, although an ‘independent person’ will need to certify that the proposed transfer is in members’ interests.
“It seems unlikely that the new legislation will ‘boost the market’ in the sense of generating more choice and encouraging new entrants. Indeed, some of the smaller providers offering a GPP product may exit the market.
“ However, the expectation is that those arrangements that remain will offer better quality and better value – but time will tell if that promise is actually delivered. There is a risk that the market will become less competitive, and innovation will slow.”
Roarty adds: “Upcoming requirements for providers’ main scale default arrangements to reach £25bn by 2030 will see providers up their game in attracting new business to reach the minimum scale. This means increased investment and innovation, which we hope will increase value and user experience.
“The upcoming VfM framework will see schemes having to demonstrate whether they provide good value or move somewhere else. We expect a large volume of poorly governed schemes wanting or having to transfer to better quality arrangements; with the contractual override for bulk transfer without consent aiding this process. The outcome of this should be inflows into better quality arrangements, predominantly master trusts, and improved outcomes for members.”
Employer options
Searle would also like to see the bulk transfer decision apply to employers.
He says: “We also think that the Government should consider adding the potential for employers to bulk transfer their employees in contract-based arrangements as this would be a beneficial tool in an employer’s ongoing due diligence of DC providers.”
Sweetman adds: “Because it is the provider that instigates the bulk transfer, and not the employer that is paying into the GPP, it is unclear whether it will increase transfer activity when an employer decides to switch provider for future contributions. There may be a danger that providers do not facilitate this type of bulk transfer for individual clients.
“The legislation allows what you might call ‘external transfers’ – moving assets from Provider A to Provider B. It also envisages ‘internal transfers’ where the same Provider unilaterally moves members to either a different investment strategy or to a different product, but within its own proposition. Time will tell, but how many providers are likely to pay for external bulk transfers? The provider’s business model relies on them retaining as many assets as possible for as long as possible.”