Industry experts have welcomed the clarity provided by the final Pension Investment Review report, praising the focus on value for money and consolidation, although there is widespread concern over the "unprecedented" move towards mandating investment.

The report revealed that the government would take a reserve power in the Pension Schemes Bill to set binding asset allocation targets as it moves ahead with plans to double the number of UK pension megafunds by 2030.

It also confirmed the March 2026 deadline for Local Government Pension Scheme (LGPS) asset pooling, with a backstop power to be taken in the bill to protect the interests of LGPS members and local taxpayers.

The rise of megafunds?

The reforms will require all multi-employer defined contribution (DC) pension schemes and LGPS pools to operate at megafund level, managing at least £25bn in assets by 2030.

The Pensions and Lifetime Savings Association (PLSA) said the reforms would "accelerate" the move to fewer, larger pension schemes and "significantly impact" the structure of the DC and LGPS segments of the industry.

The PLSA added that it sees the opportunity for better saver outcomes arising from these changes, but they must be carefully managed.

People's Partnership chief executive officer, Patrick Heath-Lay, welcomed the news, as he was "encouraged" that the government had examined the successes of the workplace pensions market in Australia and Canada and wanted fewer, bigger schemes offering greater returns to their members while investing productively in the UK economy.

"Based on this compelling international evidence, it's clear that larger schemes are better positioned to do this," he continued.

"If implemented correctly, this review has the potential to be great news for savers."

Standard Life retirement savings director, Mike Ambery, also praised the target set by the government.

"The UK is an international outlier with a highly fragmented pensions market, and today's announcement creates an opportunity for the industry to emulate some of the strengths of the Australian and Canadian pensions markets.

"In those countries, a smaller number of funds have been able to achieve higher returns for customers as a result of economies of scale and the potential to invest in a broader range of assets, frequently with a greater home bias," he claimed.

Independent Governance Group (IGG) head of policy and external affairs, Lou Davey, said that the reforms would "hasten" the consolidation of the UK pensions industry, which has the potential to bring the benefits of scale to more pension savers.

However, she noted that whether it would speed up greater investment in private illiquid assets "remained to be seen," and would depend on how quickly the government clarifies the details."

Barnet Waddingham partner, Martin Willis, said the government's push for megafunds represented "the latest step" in a long-standing drive toward consolidation, and eventual investment in private markets.

"But while scale can bring benefits like investment access, efficiency, and improved governance, it's not a silver bullet," he warned.

He argued that many smaller, well-run own-trust schemes already delivered strong, member-focused outcomes and forcing consolidation risked losing that added value.

"Instead, the government should focus on removing the real barriers – such as legacy guarantees – while offering practical support, including indemnities for schemes that want to consolidate but face structural and legacy hurdles," added Willis.

Willis also warned that while supporting UK growth was a worthwhile goal, fiduciary duty must remain at the heart of any reform.

“Bigger isn't always better – it's outcomes that matter most," he said.

BGF CEO, Andy Gregory, also argued that there needs to be "more awareness and confidence" that backing UK assets can deliver strong, long-term returns.

"There's a growing recognition that more pension capital needs to flow into the real economy.

"The hurdle isn't appetite; it's architecture - trustees need platforms with the right governance, transparency and track record," he concluded.

Mandation concerns grow

This is not the only concern, as industry experts have widely condemned the announcement that the government will take a reserve power in the Pension Schemes Bill to set binding asset allocation targets.

PLSA chief executive, Julien Mund, warned that any government intervention to direct how savers’ money is invested is risky.

"If the government doesn’t create the right environment with a suitable pipeline of investment opportunities, it would involve downside risk for scheme members. Trust in the system could also be impacted. Trustees are there to do what is best for savers.

"Any reserve power on mandation must be drafted with extreme caution," he added.

LCP partner and head of DC pensions, Laura Myers, also claimed that while many of the reforms could help drive improved member outcomes through lower costs or access to a wider range of investment options, the threat of government intervention to mandate how pension schemes invest members' money was "unprecedented" and "a step too far."

"Trustees draw on professional expertise to draw up an investment strategy which will best meet members' needs, and the political priorities of the government of the day should never override this,” she argued.

"The industry has already voluntarily entered into various agreements to ensure proper focus is given to investing in the UK economy and long-term productive assets, but anything more than this risks losing sight of the primacy of member interests".

Echoing this, Broadstone head of policy, David Brooks, said it was a "risky move," given that the Treasury had admitted that any gains for savers were unclear and likely to be limited.

"Savers will naturally be worried that their pension pots will not necessarily be invested with the best returns in mind but rather required to achieve specific allocations to Treasury-dictated geographies and sectors," he explained.

Fidelity International head of platform policy, James Carter, also noted the reservation of power to direct pension scheme investments in the future remained "a concern".

"We continue to believe that pension schemes must be allowed to direct pension assets in members' best interests, without a mandatory requirement to invest in specific markets or assets," he added.

However, the government has made some changes in response to industry feedback, confirming that schemes worth over £10bn that are not able to reach the minimum size requirement by the end of the decade will be allowed to continue operating as long as they can "demonstrate a clear plan" to reach £25bn by 2035.

The Society of Pension Professionals (SPP) president, Sophia Singleton, said she was pleased that industry concerns had been acknowledged through a reduced minimum size requirement and a "glide path" for schemes that were not yet at the required threshold.

"We also welcome the exemption for collective defined contribution (CDC) schemes that SPP and others had called for," she added.

Aon DC solution leader, Tony Pugh, also said the target of £25bn and flexibility to continue enabling innovation and supporting a competitive market were a "sensible move" that should help improve member outcomes.

Brooks added: "It is pleasing that the Chancellor has softened her stance towards schemes under £25bn, which will be allowed to continue operating if they see a road path towards reaching that size by the end of the decade. It further sets the scene for significant consolidation right across the market."

Smart Pension CEO, Jamie Fiveash, also said he "welcomed" the government's decision to extend the timeline for achieving the default fund threshold, adding that his firm had a “clear AUM trajectory” to meet the targets.

---