The market value of UK-funded occupational pension schemes increased in the first half of 2025, driven largely by gains in pooled investment vehicles, according to the latest Financial Survey of Pension Schemes (FSPS) from the Office for National Statistics (ONS).

The data showed that the market value of private-sector defined benefit (DB) and hybrid schemes rose by £21bn (2 per cent), from £1.099trn to £1.12trn between 31 March and 30 September 2025, primarily reflecting an increase in asset values.

Over the same period, the combined market value of private-sector defined contribution (DC) and public-sector DB and hybrid schemes increased by £74bn (8 per cent), from £871bn to £945bn, largely driven by growth in pooled investment vehicles.

Further analysis showed that private-sector DB and hybrid scheme assets increased by £14bn (1 per cent), with a £23bn rise in pooled investment vehicles and a £10bn increase in insurance policy assets partially offset by an £18bn fall in direct investments, particularly government bonds.

Meanwhile, insurance policy assets reached £182bn by 30 September 2025, marking the highest level in the series and reflecting continued demand for buy-ins and longevity swap transactions as schemes looked to manage liabilities.

The data also showed that deficit reduction contributions (DRCs) remained relatively low despite a modest £79m increase over the period, suggesting improved funding positions across schemes.

In the DC market, assets grew more strongly, with private-sector schemes recording a £63bn (20 per cent) increase in total assets between March and September 2025, supported by rising equity values and pooled investment holdings.

Public sector DB and hybrid scheme assets also increased, rising by £15bn (3 per cent), although this was partly offset by declines in direct equity and debt holdings.

Elsewhere, the report highlighted that rising equity markets contributed to asset growth, with the FTSE All-Share increasing by 9 per cent and the S&P 500 rising by 19 per cent over the six-month period, boosting valuations of scheme holdings.

However, the ONS noted that estimates may be subject to greater revision going forward, following the introduction of a new survey sample from Q3 2025.

Meanwhile, separate data from the FSPS also pointed to a growing 'small pots' challenge within the UK pensions system, as deferred DC memberships continued to rise.

Between Q3 2024 and Q3 2025, deferred private-sector DC memberships increased by more than 2 million, from 21.02 million to 23.04 million, while active memberships rose only marginally from 11.45 million to 11.60 million.

The figures suggested that job switching and automatic enrolment into new workplace schemes were driving an increase in the number of small, deferred pension pots, rather than in the number of new savers entering the system.

Lumera commercial director of data and dashboards, Maurice Titley, said the trend reflected structural changes in the labour market.

“The fact that deferred memberships are growing far faster than active memberships shows that job switching, rather than new savers entering the system, is now the major driver of growth in pension pot numbers,” he argued.

“As the labour market becomes more flexible and careers involve multiple employers, this means that individuals are building up multiple small pension pots over time.

“This trend will continue to increase administrative complexity and raise costs for providers while it can also make it harder for savers to keep track of their retirement savings, increase fees through duplicated charges and ultimately lead to poorer retirement outcomes if pots are lost or forgotten.”

Titley added that digital tools could play a key role in addressing the issue.

“This is exactly the issue that the MoneyHelper Pensions Dashboard aims to solve by giving savers a clear view of all of their pension savings in one place,” he continued.

“This should stimulate greater retirement planning, encourage consolidation and support savers in their decision-making processes.”

The FSPS data also showed rising contribution levels, with employee contributions to private-sector DC schemes increasing by £297m to £2.7bn, while employer contributions rose by £849m to £6.5bn in Q3 2025 compared to the previous year.

Titley noted that this was an encouraging sign but warned that it increased the need for improved infrastructure.

“As contribution levels rise over time, the importance of consolidation, data quality and digital infrastructure becomes even greater,” he said.

“Implementing best-in-class software and administration platforms will be essential to help providers manage this complexity while still delivering good member outcomes.”

Going further, Broadstone head of DC proposition, Kelly Parsons, stressed that the issue was becoming embedded within the structure of the pensions system.

“These figures show how a more mobile workforce is driving the small pots issue, with employees moving jobs, being automatically enrolled into new schemes and leaving pension pots behind rather than consolidating them," she said.

“This is now becoming a structural feature of the pensions system and is yet another challenge to retirement planning and adequacy.”

Parsons also warned that the issue was increasingly affecting employers.

“While the small pots issue is often discussed as an industry or provider challenge, it is increasingly becoming an employer issue as well,” she said.

“Employers are automatically enrolling new joiners who may already have multiple pension pots, which increases administration, adds complexity to scheme governance and can make it harder to engage employees with their retirement savings.”

She added that employers would need to take a more active role as the issue grows.

“As the number of deferred pots continues to grow, employers will need to play a bigger role in helping employees understand their pension options, including consolidation, and ensuring their workplace pension remains competitive, well-governed and delivers good member outcomes,” Parsons continued.

“This also strengthens the case for wider policy solutions such as small pots consolidation and pensions dashboards to reduce fragmentation across the system.”

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