“Since DC took over from DB as the main source of pension provision in the UK and auto-enrolment was introduced, DC assets have increased massively. But this still remains relatively small compared with what we expect to see in the future. Now is not the time to accelerate the pace of consolidation.

“The impact of phase one of the consolidation process is still being seen and will take some time to work itself through. We’d hope, and expect, that this will result in a functioning, competitive environment of about 20 providers each managing assets in excess of £10bn. Master trust providers are still in the process of acquiring scale post-authorisation making the provider market in this area still relatively immature. We are also seeing that the benefits of consolidation are weighted towards larger employers. Today many large single trust schemes still provide a superior all rounded offer to the consumer. The market is simply not, yet, ready for more."

Commenting on the importance for continued employer engagement in schemes, Lee continues:

“High-level of employer engagement in their staff pension schemes is still needed. It’s a role that has grown since the introduction of auto-enrolment and surveys have shown that many employees see their employer as a trusted source of financial information against a backdrop of a generally low level of financial education. There’s a risk that, with widespread outsourcing through master trusts, employers become less involved in the retirement outcomes of their workforce and this needs to be ensured.”

Commenting on the issues with smoothing performance fees for private markets and new models for accessing illiquid assets, Callum Stewart, Senior DC Consultant, Hymans Robertson says:

“While the DC industry is very much in its infancy in terms of incorporating private markets assets, we are starting to see innovative solutions to this. By driving regulation around private markets assets too soon, we could lose a golden opportunity to learn from innovation, and ultimately stifle the ability to improve individual member outcomes over the longer term. Emphasis should instead be placed on improving levels of transparency of costs and charges, and not over-regulating the frameworks for their assessments. Trustees, for example, already need to satisfy that changes to the investment approach are in the interests of their members.

“By smoothing performance fees, members will pay a generally higher fee level at times when the fund is under-performing and this is something we don’t feel is consistent with delivering good outcomes for all members. We note that the smoothing of performance fees is, rightly, optional in the regulations coming into force from October this year.

“The current proposals for Long Term Asset Funds do not appear to address the significant practical challenges that exist for DC schemes to invest in private markets assets. Indeed, the proposals appear to introduce additional governance burden and risk and we are unconvinced that they will offer a sufficient competitive advantage for trustees to select relative to other opportunities.

“Ultimately, there are better ways to access illiquid assets for DC and prefer to allow time for the market to innovate towards best in class solutions.”