The Shift to Master Trusts: Where the UK DC Market Stands Today
16th April, 2026
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The Pensions Regulator’s latest 2025 DC landscape report confirms what has been evident for some time: master trusts now dominate the market as smaller schemes continue to exit. The number of DC schemes has fallen by 15% to 790 in 2025—consistent with the previous year’s decline—while assets have grown from £205 billion in 2024 to £249 billion in 2025, an increase of 22%. Membership has also risen by 7% year on year.
The UK defined contribution (DC) pensions market has undergone a profound structural shift over the past decade. What began as gradual consolidation has now reached a tipping point. Master trusts are no longer an emerging trend—they are the dominant model. The conversation has moved on from whether schemes should consolidate to when, why, and under what conditions.
A Market That Has Already Moved
By most measures, consolidation has already happened. The majority of DC members and assets now sit within master trust arrangements, while the number of standalone trust-based schemes continues to fall rapidly.
The underlying rationale is clear: scale is expected to deliver better outcomes. Larger schemes can reduce costs, strengthen governance, and access a broader and more sophisticated range of investments.
For trustees and sponsors, the default assumption has shifted. Remaining standalone now requires justification, rather than consolidation.
Regulation as a Catalyst
Regulation has been a central driver of this shift. Increasing scrutiny on value for money has made it progressively harder for smaller schemes to demonstrate that they can compete with large, well-resourced master trusts. At the same time, policymakers have signalled clear support for consolidation, favouring fewer, larger schemes with the scale to invest efficiently and support long-term growth.
In this environment, inertia is no longer a neutral stance. Schemes that fail to assess their position risk falling short of rising expectations.
The Case for Scale
The argument for scale is straightforward. Larger schemes can spread fixed costs, negotiate more competitive fees, and invest in more sophisticated governance frameworks. They are also better positioned to access illiquid assets—such as infrastructure and private equity—which are increasingly seen as important drivers of long-term returns.
For many employers, particularly those without the resources to operate complex pension arrangements, master trusts offer a compelling combination of efficiency and expertise.
Not a One-Way Story
Despite strong momentum, consolidation into master trusts is not universally accepted as the optimal solution in every case.
Concerns remain around over-consolidation, with some observers warning that the market could become concentrated among a small number of very large providers—raising questions around competition, innovation, and systemic risk.
Standardisation is another challenge. Master trusts are designed to operate at scale, which can limit flexibility. For employers with bespoke benefit structures or a strong desire to shape member outcomes, this may be a drawback.
There is also increasing sensitivity to policy risk, particularly the potential for greater government influence over how large pools of pension capital are deployed.
Who Isn’t Moving—and Why
Schemes that have not transitioned to master trusts tend to fall into a small number of categories.
Large, well-governed single-employer schemes are the most prominent holdouts. With sufficient scale and internal capability, these schemes can replicate many of the advantages of consolidation while retaining full control over investment and member experience.
Others remain independent due to bespoke design features or because pensions form a strategic part of their employee value proposition, where control and customisation are prioritised over efficiency.
A further group is mid-journey—actively considering consolidation but yet to execute, often due to practical or operational constraints. Alongside them is a diminishing tail of smaller schemes that have yet to fully engage with the implications of regulatory change.
A Maturing Market
As consolidation has progressed, competitive dynamics have evolved. The market is no longer defined solely by movement into master trusts, but increasingly by competition within them.
Employers are now asking more nuanced questions—not just whether to consolidate, but which provider offers the best combination of cost, governance, investment strategy, and retirement outcomes.
In response, master trust providers are moving upmarket, targeting larger schemes and offering greater flexibility, including more tailored investment approaches and increasingly sophisticated decumulation solutions.
The Road Ahead
The direction of travel remains clear: further consolidation. The likely end-state is a market dominated by a relatively small number of very large master trusts, alongside a limited number of high-quality single-employer schemes with the scale and capability to remain independent.
Conclusion
The shift to master trusts is no longer a future possibility—it is the present reality of the UK DC market. For most schemes, the question is not whether consolidation makes sense, but whether there is a compelling reason to resist it.
Those that remain outside the master trust model are not necessarily behind. In many cases, they are either strong enough to stand alone or operating under specific strategic considerations. However, the space for independence is narrowing, and the burden of proof continues to increase.
Importantly, consolidation does not remove employer responsibility. Employers retain a clear duty to ensure that member outcomes are delivered, even within a master trust structure. This requires active engagement with, and where necessary challenge of, master trust trustees on issues such as investment strategy, value for money, governance standards, and retirement outcomes.
It also demands new capabilities. For schemes transitioning into larger arrangements, trustees must have the skills and experience to govern that process effectively. This includes understanding the complexities of DC wind-ups—recognising that they are not business as usual, but discrete, high-stakes exercises requiring focused oversight.
At the same time, the move towards fewer, larger, and more complex schemes introduces a different order of governance challenge. Trustees and sponsors must be confident navigating variable charging structures in the context of value for money, understanding the role of illiquid investments in DC portfolios, and engaging with the dynamics of master trust structures, including relationships with strategists, scheme funders, and other key stakeholders.
Against this backdrop, trustees and sponsors must ask themselves a fundamental question: are they suitably equipped for this brave new world? Consolidation may be the benchmark—but accountability remains firmly in their hands.
Contact us
We hope you find this information helpful. Should you wish to learn more, we would be happy to arrange a call at your convenience. For further assistance, please contact:
Rosy Anand, Head of DC Trusteeship
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