The pensions industry has been urged to ensure that it is prepared for an increasing amount of consolidation, as industry experts predicted a significant amount of consolidation, both in terms of individual pots and schemes, by 2035.

During a session at the PLSA Annual Conference, panellists were asked what changes in the market they expect to see by 2035, with consolidation highlighted as a key area of potential change.

LCP partner, Steve Webb suggested that consolidation in schemes, both defined benefit (DB) and defined contribution (DC) will be seen by 2035, while the launch of the pensions dashboards will also trigger greater individual consolidation.

This was echoed by The Pensions Regulator chair, Sarah Smart, who pointed out that this could have broader impacts on the industry.

She stated: “After 12 years, we'll be able to see the real impact of that [consolidation] and I think there will be some very large DB schemes, both open and shut.

“They will be run by very sophisticated, well trained individuals, still supported by lay trustees, and those individuals will have to meet quite a high bar to demonstrate that that they can be entrusted with looking after those very significant sums of money.

"There will be a small-ish number of very large master trusts, I think, and I expect they will be competing directly to consumers based on the value that they present to those consumers and that consolidation of pots will really help."

Smart suggested that this increasing consolidation will also impact regulation, acknowledging that TPR will have to evolve.

“I think the requirements on our regulation in 2035 are going to be significantly different than they are now, particularly if this consolidation has happened," she continued.

“We're prepared for that and we're working towards that, what it's actually it looks like we'll have to wait and see.”

Considering the trend towards consolidation, Smart urged industry organisations to ensure that they are prepared for a more consolidated marketplace.

“My message for everyone, industry schemes, providers, advisors, regulators” she stated, “when thinking about consolidation is what does that mean for you?

“And then when you think about how to prepare for that, does it mean actually we're a small, small scheme we need to do it? Does it mean it's a big scheme, and it's going to be more difficult for us to get the talent that we need to run.

“How, as a regulator, do we need to adapt to that period of consolidation? As an advisor, what's that going to mean to our clients?”

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