The government’s proposed workplace pension scale framework must focus on member outcomes rather than consolidation for the sake of it, while recognising scale already achieved through shared investment strategies and pooled assets, industry figures have argued.

The comments were made in response to the Department for Work and Pensions’ (DWP) Discussion paper on key elements of the Scale Policy, which closes on 7 September.

Standard Life backed the government’s ambition to increase the scale of workplace pensions, highlighting the potential benefits of stronger governance, more sophisticated investment strategies and improved long-term outcomes.

However, it warned that the proposed Main Scale Default Arrangement (MSDA) framework should focus on the outcomes delivered for members rather than prescribing a single investment approach.

Standard Life managing director of workplace and retail intermediary, Emma Furlonger, said: “While consolidation has an important role to play in creating a more efficient pensions market, it’s essential that the introduction of a Main Scale Default Arrangement framework focuses on the outcomes being delivered for members rather than prescribing a single investment approach.”

She noted that providers needed sufficient flexibility to meet common investment objectives through different structures and products where this was in members’ best interests.

Furlonger also argued that the rules should recognise that scale could already be achieved through shared investment capabilities, governance frameworks and underlying investment building blocks, rather than requiring identical fund structures or asset allocations.

“This will help avoid unnecessary fund mergers or member movements that do not improve outcomes,” she added.

Similar concerns were raised by The Investing and Saving Alliance (TISA), which recommended that the government assess pension scale across common funds and investments sitting beneath different default arrangements, rather than measuring each default in isolation.

TISA warned that failing to recognise pooled underlying assets could force effective bespoke arrangements to merge without delivering any additional benefit for savers.

TISA head of policy, products & long-term savings, Renny Biggins, said: “Greater scale can deliver real benefits for pension savers, but bigger does not automatically mean better.

“Many bespoke arrangements are designed around the particular needs of employers and their workforces while already benefiting from scale through the same underlying investment funds.”

He warned that forcing these arrangements into a single default merely to satisfy a scale requirement could remove useful tailoring without improving member outcomes.

TISA also suggested that such an approach could encourage some employers to move towards single-employer trusts to regain greater control, potentially increasing fragmentation rather than reducing it.

In addition, the organisation warned that the scale reforms needed to work coherently alongside other changes to the defined contribution (DC) market.

In particular, it raised concerns that the proposed Value for Money (VFM) chain-linking rules could discourage providers from consolidating weaker defaults if doing so would adversely affect the performance assessment of the receiving arrangement.

TISA therefore called for rules that allow appropriate differences between default arrangements where these reflected different workforces, risk profiles, or retirement strategies, while ensuring VfM rules did not inadvertently deter beneficial consolidation.

It also urged the government to delay any wider fragmentation review until the scale and VFM reforms had been implemented, and called for flexibility for specialist strategies such as Sharia-compliant funds.

Pensions UK echoed the calls for scale to remain a means of improving member outcomes rather than becoming an objective in itself, arguing that the framework should recognise how pension assets are managed in practice.

It said assets managed under the same investment strategy, investment team and governance should be recognised as benefiting from scale, regardless of their legal structure.

However, Pensions UK also warned that greater clarity was needed around transition arrangements, pathways for new entrants and the approval of alternative defaults, amid concerns that uncertainty was already influencing the market.

The organisation noted that some advisers were declining to include master trusts that had not yet reached the proposed scale threshold in provider selection exercises, irrespective of their performance, governance or growth trajectory.

It warned that without clearer rules, consolidation could be driven by regulatory uncertainty rather than member outcomes, potentially reducing competition, innovation and choice.

Pensions UK director of policy and advocacy, Zoe Alexander, said: “Decisions taken now will shape the workplace pensions market for years to come. Scale can bring significant benefits, but to deliver the best outcomes for savers without causing unnecessary market disruption, the framework must recognise where scale genuinely exists and give providers the certainty they need to plan and invest.

“Uncertainty is already affecting which schemes are considered during provider selection, regardless of their performance, governance or potential to grow. Government can address this by setting out clear transition arrangements, new entrant pathways and criteria for alternative defaults ahead of the next consultation.”

Alexander also stressed that the scale reforms needed to work alongside changes to the retirement market, arguing that regulation should enable schemes to develop propositions reflecting how members intend to use their savings in retirement.

Meanwhile, TPT similarly supported the government’s scale ambitions in principle, but argued that the framework needed to reflect how assets were invested and governed in practice.

The provider stated that measures should recognise existing scale, apply consistent measurement and avoid creating artificial distinctions or conflicts in scheme governance.

TPT welcomed the proposed Common Investment Strategy (CIS) definition as a way of identifying assets that share the same investment strategy and decision-making framework.

However, it stressed that where assets met both CIS and same-scheme connected criteria, including common governance and investment decision-making, further distinctions should not be created purely on the basis of legal structure or policy exemption status.

TPT also warned that common ownership alone should not allow separate schemes to aggregate for scale purposes where independent trustee boards were responsible for different investment strategies.

It called for MSDAs to be defined “by substance”, arguing that technical or inadvertent defaults, or differences arising solely from charges, administration or sectional structures, should not split what was effectively a single investment proposition.

However, TPT stressed that genuinely distinct investment strategies should remain separately recognised, including ethical or belief-based defaults designed to meet particular member or employer requirements.

TPT head of policy, Ruari Grant, noted: “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.”

Grant added that scale should be “a means to achieving better outcomes for members, rather than an end in itself”.

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

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