The Investment and Saving Alliance is calling on the government to measure scale in defined contribution based on investments and funds used, with TPT Retirement Solutions also urging a focus on assets over legal structure. Others have said that measuring consolidation at umbrella level could limit its impact.

A discussion paper is closing today that seeks input for the regulations that will govern the new 'main scale default arrangements' under the Pension Schemes Act 2026. A consultation on regulations is expected in the second half of 2027. The Pensions Regulator and Financial Conduct Authority will then consult on codes and guidance in 2028.  

In response to the paper by the Department for Work and Pensions, TISA recommends that DC scale should be measured across the funds and investments sitting under different default arrangements. It argues that measuring each default option separately could force bespoke defaults to merge without improving outcomes for savers. 

“Many bespoke arrangements are designed around the particular needs of employers and their workforces while already benefitting from scale through the same underlying investment funds. Forcing those arrangements into a single default simply to meet a scale requirement could remove useful tailoring without creating any additional benefit for members," said Renny Biggins, head of products and long-term savings policy at TISA. 

 

The group also warns that 'chain-linking' of investment performance of legacy and replacement defaults, proposed under value for money regulations – could discourage providers from consolidating weaker defaults, if doing so detracts from the performance of the receiving arrangement. 

 

In addition to allowing "appropriate differences" between defaults and making sure chain-linking does not limit consolidation, TISA recommends the government should provide enough flexibility for specialist investment strategies, including Sharia-compliant funds. It also says the DWP should keep the framework adaptable as the pensions market evolves, saver behaviour changes and technologies such as AI are being introduced.  

Others believe consolidation at default level could actually limit consolidation. Michael Jones, partner at law firm Sackers, said: “While the scale measures will likely consolidate assets into bigger pools of capital, it is unlikely they will reduce fragmentation in the pension system, at least initially, because the scale tests are at umbrella fund-level. For schemes seeking approval via main scale default arrangements which combine master trusts and GPPs, there will still be underlying differences in regulatory regimes, pension arrangements, and governance structures, which puts greater onus on the contractual override and the VFM framework to achieve the policy aim of fewer pension schemes." 
 

Jones also argued that the scale tests should not be confined to DC accumulation products.

  

“To encourage innovation and support the nascent CDC market, we consider these assets should count towards the scale tests so long as they form part of a common investment strategy in the same scheme,” he said. 

 

The firm has wider concerns about market dynamics and is urging the government to consider opening applications for the transition pathway now, "to facilitate orderly and efficient consolidation, ensure transparency, encourage innovation and avoid stifling competition", said Jones. 

The DWP only expects applications for scale and the transition pathway to be made from 2029, with rules coming into force in April 2030.

The new entrant pathway requires careful scrutiny too, Jones added: "If a scheme cannot have members on application, potential innovators are unlikely to enter the market now, which leads to a stagnant and uncertain market and conflicts with the policy aim of encouraging schemes with innovative product design.”  

One of the DC pension providers affected by the rules is TPT Retirement Solutions. The firm qualified its support for the scale measures by saying the detailed framework must align with how assets are invested and governed in practice, avoiding artificial distinctions or governance conflicts. 

TPT is therefore calling for the future regime to include all assets contributing to the same investment scale. While it welcomes the proposed Common Investment Strategy definition, it says that where assets satisfy both CIS and same-scheme criteria, including common governance and investment decision-making, government must not create further arbitrary distinctions based on scheme structure and policy exemption status.  

Ruari Grant, head of policy at TPT, said: “We support the government’s objectives regarding scale in principle, but the framework needs to recognise where scale already exists in practice. Where assets are invested under the same strategy, governance and decision-making framework, their legal or sectional structure should not prevent them from counting towards any scale measurement."  

The rules need to distinguish between artificial fragmentation and genuinely different investment propositions, while giving trustees sufficient flexibility to design strategies that effectively meet members’ needs, Grant argued.  

TPT says common ownership alone should not allow separate schemes to aggregate where independent trustee boards set different strategies, to avoid creating conflicts between trustee responsibilities. The provider is also asking the government to provide greater clarity on what would qualify as an ethical and belief-based strategy to avoid forcing members out of funds that satisfy their preferences. 

Emma Furlonger, managing director of workplace and retail intermediary at Standard Life, had similar concerns.

“As investment strategies evolve, providers must retain enough flexibility to meet common investment objectives through different structures and products where this is in savers' best interests," she said.

"The regulations should recognise that scale can already be achieved through shared investment capabilities, governance frameworks and underlying investment building blocks rather than identical fund structures or asset allocations. This will help avoid unnecessary fund mergers or member movements that do not improve outcomes."