Fewer than 50 trustees now control more than half of all occupational (trust-based) defined contribution (DC) pension assets, according to research from LCP, raising concerns over governance, accountability and outcomes as the market consolidates into megafunds.

The report, Pension Powerbrokers 2: The DC Generation, found that the trustees of the seven largest master trusts oversee more than £160bn in assets, highlighting what LCP described as an “extraordinary” concentration of power in the DC market.

This marks a significant shift from the defined benefit (DB) landscape, where around 500 trustees control half of scheme assets, suggesting concentration in DC is around 10 times greater.

The findings come as the government continues to push for consolidation into fewer, larger schemes, with its recent consultation on trusteeship suggesting that scale and professional governance would improve outcomes.

However, LCP warned that this approach risks overlooking key governance challenges, particularly as master trusts grow to serve millions of members and thousands of employers.

The research, based on an analysis of scheme data and interviews with 15 industry figures, found that some master trusts are overseen by just four or five trustees.

LCP partner, Steve Webb, suggested that the scale of consolidation required closer scrutiny.

“The increasing concentration of power in the hands of a small number of trustees is extraordinary,” he said.

“Whilst these individuals will be carefully chosen and typically highly expert, the model of having a handful of people overseeing huge megafunds raises serious questions, which the government has not so far addressed.

“In particular, much more needs to be done to make sure that there is proper accountability of trustees by employers and scheme members, and that there is scope for innovation and challenge in these enormous financial institutions.”

The report also highlighted that provider influence remains significant, with insurers and consultancies often responsible for day-to-day decisions and innovation, even where trustees retain ultimate oversight.

At the same time, the role of DC trustees is becoming increasingly complex, driven by regulatory change, including the forthcoming Value For Money (VFM) framework, new decumulation requirements, and pressure to invest in productive finance.

LCP partner, Nathalie Sims, stressed that this reinforced the need for stronger governance structures and support.

“There is no doubt that the way pension schemes are run will benefit from the current drive to greater professionalisation of trusteeship,” she stated.

“In particular, overseeing multi-billion pound pension schemes requires a highly skilled group of people, with access to ongoing training and support.

“But it is also important that we have structures in place to make sure that there is plenty of independent challenge and advice for these megafund trustees, as well as diversity of thought amongst those who secure these crucial roles in the future of workplace pensions in Britain.”

Beyond governance, the report pointed to a weakening of both employer and member influence in the DC system.

While employers retain power when selecting a provider, their influence often diminishes once they join a master trust, with only the largest firms typically able to secure bespoke arrangements.

Similarly, member voice risks becoming “quieter still” as schemes scale up, with trustees increasingly relying on aggregated data and behavioural insights rather than direct engagement to understand saver needs.

LCP also warned that the emergence of performance league tables under the VFM framework could further reduce diversity and innovation, encouraging schemes to adopt similar strategies to avoid underperformance.

The firm concluded that while consolidation and scale can bring benefits, the current trajectory risks creating a system dominated by a small number of decision-makers, without sufficient mechanisms for challenge or accountability.

It argued that policymakers should not view the transition to megafunds as “job done”, and instead focus on ensuring robust governance frameworks that support trustees while holding them to account.

The report suggested that without such safeguards, the long-term success of the UK’s rapidly growing DC system could be undermined, despite the broader shift towards larger, more professional schemes.

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