The pension administration market's ability to withstand major disruption or absorb an emergency transfer remains uncertain, with consolidation, regulatory reform and technological change placing increasing demands on services, the Pensions Policy Institute (PPI) has warned.

The PPI's latest report, The Evolving Pensions Administration Market: Opportunities and Risks, sponsored by the Pensions Administration Standards Association (PASA), found that the ability to manage day-to-day administration did not necessarily demonstrate sufficient capacity to accommodate major projects, technological disruption or the sudden failure of an administration provider.

It warned that while investment in automation and artificial intelligence (AI) could improve efficiency, introducing new technology alone did not guarantee better service or improved member outcomes.

The research highlighted the growing pressures facing administrators as the industry responds to pension scheme consolidation, pensions dashboards, changes to defined benefit (DB) provision, public service pension reforms and increasing regulatory expectations.

In particular, the report found that the number of occupational defined contribution (DC) and hybrid pension schemes with at least 12 memberships fell by 15 per cent between 2024 and 2025, while DC memberships within those arrangements increased by 7 per cent.

According to the PPI, this demonstrated that consolidation was concentrating administration responsibilities across fewer schemes without necessarily reducing the overall workload.

The research also identified the ongoing demands associated with deferred members, with occupational DC and hybrid arrangements holding 21.3 million deferred memberships in 2025, compared with 11.4 million active memberships.

It stressed that deferred records still required maintenance and could generate substantial work when members transferred, retired or accessed their benefits.

The PPI also raised concerns about the market's preparedness for a major administration provider failure, warning that the availability of alternative providers did not necessarily mean sufficient capacity existed to accommodate emergency transfers.

It noted that a receiving administrator would need the necessary expertise, systems and implementation resources to take on additional schemes while continuing to deliver services to existing clients.

The report found that market-wide evidence of spare capacity, emergency transfer capabilities and operational resilience remained limited, making it difficult to assess how effectively the sector could respond to a major disruption.

However, it stressed that these evidence gaps did not, in themselves, demonstrate insufficient capacity or poor performance.

Meanwhile, technology was identified as both an opportunity and a potential source of additional risk.

While automation could reduce routine processing and allow administrators to focus on more complex cases and member communication, the report warned that effective implementation depended on reliable data, documented benefit rules, and appropriate oversight.

It also highlighted the risks of greater reliance on shared technology systems and suppliers, warning that disruption to a common service provider could affect multiple administration organisations at once.

The PPI argued that greater use of AI would change the skills required across the administration workforce rather than eliminate the need for specialist pensions expertise, particularly when dealing with complex benefits and checking automated outputs.

PPI policy researcher and report lead author, Shantel Okello, said: "Pensions administration is changing, but members still need their benefits paid accurately, and their questions answered when it matters.

"Automation and better-connected systems have the potential to improve services, but introducing technology is not the same as demonstrating a better experience or improved outcomes for members."

Okello stressed that the sector's challenge was balancing investment in modernisation with the need to maintain essential services.

Meanwhile, PASA chair, David Fairs, warned against assuming that consolidation and technological investment would automatically ease the pressures facing administrators.

"Every reform eventually reaches an administrator's desk. Turning policy ambitions into a service members can rely on takes skilled people, usable data, robust systems and time," he argued.

"This research challenges some comfortable assumptions. Fewer schemes do not automatically mean less work. More technology does not automatically mean better service. And capacity to manage today's workload does not tell us whether the market could absorb a major provider failure tomorrow."

Fairs also highlighted the continued importance of specialist knowledge as AI and automation become more widely used.

"Technology and AI have real potential to improve consistency and member service, but they won't remove the need for skilled administrators," he continued.

"Their expertise and judgement will remain essential to resolving complex cases, supporting members and making sure automated processes deliver the right results."

He concluded that the industry's priority should be improving its understanding of administration capacity, operational dependencies and business continuity arrangements to ensure members continued receiving reliable services throughout periods of change.

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