New research from Howden Employee Benefits, reveals the UK’s defined contribution (DC) pensions market is entering a new phase. With master trusts firmly established as a dominant structure in the large scheme market, attention is increasingly turning to whether greater scale is translating into better outcomes for members.
Howden’s latest annual Analysis of Large Defined Contribution Schemes report, examined 147 large DC schemes representing £200bn of assets and 3.9 million members, revealing that master trusts now account for 41% of large DC schemes, compared with 34% own-trust arrangements and 25% contract-based schemes.
As regulators place greater emphasis on scale and value for money, the DC market is increasingly moving towards fewer, larger pension schemes.
This surge in consolidation now sees large master trusts holding 37% of DC assets across the schemes analysed. This represents over half of the total assets in bundled DC arrangements and almost two-thirds (63%) of members. They also continue to offer the lowest average default charges of any major scheme structure, at 0.217% – highlighting one of the key benefits scale is delivering for members.
As consolidation continues and master trusts grow in prominence, Howden argues the next challenge is ensuring this scale translates into better engagement and retirement outcomes for members.
Target drawdown is now the most common retirement objective among large schemes, but analysis of more than 33,000 members who started taking benefits in 2025 reveals a disconnect between scheme design and member behaviour. Around 87% took pension savings as cash through lump-sum withdrawals, including Uncrystallised Funds Pension Lump Sum (UFPLS) payments, while just 35% entered drawdown and 7% purchased an annuity – some members select multiple options.
The report also found that while digital access continues to improve, member engagement remains a challenge. Most large schemes now report online registration rates above 60%, yet expression-of-wish completion rates remain below 40% for the majority of schemes, suggesting that improved access does not automatically translate into meaningful engagement.
Mark Futcher, Head of DC and Financial Wellbeing at Howden, said: “The government’s consolidation agenda is clearly having an impact. Master trusts are growing, schemes are getting bigger, and many of the benefits of scale are starting to come through.
“But bigger pension schemes were never supposed to be the end goal - better retirement outcomes were. Despite schemes increasingly designing for flexible retirement incomes, many members continue to favour cash withdrawals. And while people are logging into their pensions, few are taking the expected actions to genuinely improve their outcomes.
“Consolidation has helped create bigger, more efficient schemes - but members don’t experience pensions through scheme structures of governance models. They experience them through the decisions they make. If we want better retirement outcomes, we need to focus just as much on engagement, support, and innovation as we do on scale.”
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