Financial advisers recognise the importance of scale as the workplace pensions market consolidates, but providers will need to do more to demonstrate how it translates into better outcomes for members, according to new research¹ from People's Pension².
More than half (51%) of advisers believe scale will become an increasingly important differentiator between workplace pension providers, versus just 8% who disagree. At the same time, only 11% believe smaller providers can continue to compete effectively with larger schemes, underlining the increasingly important role advisers expect scale to play as the market evolves.
However, advisers are looking beyond size alone when assessing DC providers. A quarter (25%) believe scale delivers important operational advantages but does not necessarily translate into better retirement outcomes, while only 9% believe increasing provider scale directly improves member outcomes.
People’s Pension also found that the majority (58%) of advisers say member outcomes and support matter more than cost alone, versus a small minority (12%) who disagree. The findings suggest advisers increasingly expect providers to demonstrate how scale translates into tangible benefits for members.
The research comes as the Pension Schemes Act accelerates the next phase of workplace pension reform, with greater emphasis on consolidation, value for money and improving member outcomes. Against that backdrop, advisers recognise the benefits that larger providers bring, but need more evidence they are using their scale to deliver consistently better member outcomes.
Stuart Reid, Distribution Director for People's Pension, said: "It's encouraging to see advisers recognising that scale is becoming increasingly important as schemes consolidate and employers look for providers with the governance, resilience and investment capability to deliver over the long term.
"What stands out from these findings is that whilst advisers clearly see the value of scale, they're not yet convinced that it automatically translates into better outcomes for members. That reinforces the importance of providers demonstrating the value scale can create in practice. We're committed to continuing to improve retirement outcomes for members, and I believe that as the market sees more examples of how scale is being put to work, advisers will become increasingly confident in the benefits it can deliver."
"Ultimately, scale should never be judged in isolation. Its real value lies in what it enables providers to deliver for employers and members, and that's where the market is increasingly focusing its attention."
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