DWP publishes Scale Policy discussion paper

Commenting on the DWP’s Scale Policy discussion paper, Mark Jaffray, Partner and Senior DC Investment Consultant, Hymans Robertson says:

“Welcome DWP’s recent Scale Policy discussion paper and the additional clarity it provides on how the policy could operate in practice. It builds on the direction already set out in the Pension Schemes Act 2026 and represents a positive step towards a workplace pensions market with fewer, larger and more efficient default arrangements. We remain supportive of the objective of consolidation, which has the potential to improve governance, investment capability and member outcomes. 

“The proposed approach appears sensible. Focusing the scale test on a provider’s Main Scale Default Arrangement and Common Investment Strategy recognises that many of the benefits of scale are achieved at the investment strategy level. Similarly, allowing assets to be combined across connected schemes within the same corporate group should support efficient implementation while preserving competition within the wider market.

“It is also encouraging to see a framework that aligns with how many default arrangements already operate today. Allowing investment strategies to vary according to age accommodates established approaches such as lifestyle strategies and target date funds, where investment risk changes as members move closer to retirement.

“As the policy develops, there are some areas where further consideration may be beneficial. For example, policymakers may wish to consider whether a member’s expected retirement date, rather than age alone, could provide a more accurate basis for investment decisions. Equally, as guided retirement solutions become more common, there may be merit in retaining some flexibility within default arrangements to reflect the different ways members may choose to access their pension savings in retirement.

“Overall, these feel like refinements rather than concerns. The consultation provides a constructive framework for industry engagement and should help ensure the final regulations deliver the benefits of scale while maintaining flexibility for schemes and good outcomes for members.”

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