The government’s Pension Schemes Bill could reshape the UK pensions landscape, according to Pensions and Lifetime Savings Association (PLSA) deputy director of policy, Joe Dabrowski.

Speaking at the Pensions Age Northern Conference, Dabrowski said that the bill contained some long-awaited, “really welcome” reforms, but is also “quite problematic” in some "really big" areas.

In particular, he raised the government’s backstop of powers to mandate pension fund investment in UK assets, directing the Local Government Pension Schemes (LGPS) pool’s investment strategy and telling local authority funds who they must pool with as areas of concern.

Dabrowski said these changes mark “big steps” in shifting control away from trustees, committees or authorities to the government.

“Being able to direct the pool's investment strategy and also tell local authority funds who they must pool with are also kind of big steps in government stepping in and filling a space, which is usually the trustees', committee's or authorities’ role and responsibility,” he said.

Beyond governance, Dabrowski warned that the bill will change the shape and the future of the market, particularly in the defined contribution (DC) space.

He said that the industry is going to see a “real rapid consolidation” in the DC market where 90 per cent of savers currently save their pension.

Dabrowski explained that in the past five years, DC market consolidation has already hit 60 per cent.

He suggested that, by 2035, based on the trajectory and the potential acceleration of value for money and other changes in the bill might make, the industry could see most people in between 10 and 25 “really big” DC providers.

“Over a period, each one of those is going to be managing, probably by 2035, close to £50-100bn each,” he said. “These are going to be big, big financial institutions with 30 to 35 million savers in them.”

He noted that given this, it will be a very different pension landscape, and said it was expected that there will be a continued “sort of slow decline of defined benefit (DB)”.

But Dabrowski cautioned that this “world where you have got 20 or 30 massive schemes” comes with risks, such as higher-class services to members, changing regulatory environment and increased threat of scams and misinformation.

He called for a more open debate on what kind of pension system the UK wants to build.

“So, we need to think about how we want to shape that world, what concerns would we have about it? What are some of the things that are going to move across the next part of 10 years? And how do we make sure that savers get good outcomes?” he said.

Therefore, he said these schemes will need to operate in a “very different way”, as the expectations of employers and savers of schemes will be “hugely different”.

“It’s not going to get any quieter or any easier. It’s going to get tougher, so we need to think about what this means,” he said.

Dabrowski highlighted that the pensions roadmap, released alongside the bill, shows there are going to be “a lot of overlapping changes that are coming”.

“So, people need to think about the operational consequences for that and what that means,” he said.

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