The UK’s pensions governance and regulatory framework could become “unfit for purpose” within the next decade as consolidation reshapes the defined contribution (DC) market, a report from the Social Market Foundation (SMF) has warned.

The paper, authored by pensions expert, Michael Johnson, argued that consolidation under the forthcoming Pension Schemes Bill could leave as few as 10 dominant “megatrust” providers by the mid-2030s, creating institutions of systemic importance that the current regulatory regime was not designed to oversee.

In light of this shift, Johnson stressed that governance, oversight and trustee capability must evolve alongside the market, warning that existing frameworks risked falling behind the pace of structural change.

He proposed that The Pensions Regulator (TPR) should become the single regulator of all workplace DC pension schemes, while contract-based workplace defaults should be phased out entirely and made ineligible for automatic enrolment contributions from 2030.

The report suggested that as pension schemes scaled up into large “megatrusts”, governance standards should align more closely with those expected of systemically important financial institutions.

Johnson therefore called for a major upgrade in trustee capability, including the introduction of a single national accreditation framework for trustees covering conduct standards and defined technical competencies.

Under the proposals, accreditation frameworks currently offered by the Association of Professional Pension Trustees (APPT) and the Pensions Management Institute (PMI) would be unified into a single national standard, with mandatory examinations for all trustees, including corporate sole trustees.

The report also outlined potential governance reforms for future megatrusts, including restrictions on provider representatives serving on trustee boards and the creation of a national pool of regulator-approved “megatrust-fit” trustees from which board appointments could be drawn.

In addition, the report recommended stronger member representation, including dedicated funds within megatrusts to train aspiring member trustees, paid time off work for those serving on trustee boards, and annual general meetings accompanied by publicly available audited reports, including value for money (VfM) assessments.

Beyond DC governance, the report also explored reforms for the defined benefit (DB) sector, suggesting that the Pension Protection Fund (PPF) could play an expanded role.

In the near term, Johnson proposed establishing a DB scheme consolidator run by the PPF to acquire smaller or vulnerable schemes, while in the longer term, the PPF could potentially become the sole regulator of the shrinking DB landscape.

The report also urged caution around the rapid expansion of pension scheme investment into private market assets, warning against mandatory asset allocation policies introduced as part of the government’s “productive finance” agenda.

Commenting on the report, Johnson, said the Pension Schemes Bill represented a significant opportunity to reshape the workplace pensions market.

“The Pension Schemes Bill 2025 is welcomed. It is ambitious and far-reaching, intent upon reconfiguring the workplace DC pensions market to increase retirement incomes for millions of scheme members.

“It is hoped that implementation of my paper’s proposals, to enhance the allied governance and regulatory frameworks, will play a part in achieving this, while also providing a steer towards what consumers really want: a single DC pension pot holding both personal and workplace-derived contributions. Simplicity to the fore.”

Also commenting, SMF director, Theo Bertram, noted that the report raised important questions about the future regulatory structure of the UK pensions system.

“This is an important provocation for government,” he said.

“Savers do not care whether their pension is ‘contract’ or ‘trust’ based - they care about security, value and retirement income.

“Michael’s argument is that the regulatory system should be reshaped to achieve those goals.

"Meanwhile, workplace pension megafunds are about to become some of the most powerful financial institutions in Britain, and Michael makes a clear case that if we end up with a small set of pension giants, then they must be regulated as giants,” he added.

This article was first published on our sister website, Pensions Age.

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