The government will continue to drive consolidation in the pensions sector as smaller schemes face higher costs, governance challenges, and a limited ability to invest in a wider range of assets, Pensions Minister, Torsten Bell, has said.

Speaking at the TUC Pensions Congress 2026, Bell noted that while pension fund consolidation had been underway since the introduction of automatic enrolment, the government now intended to accelerate the process across both public and private sector schemes.

Bell explained that consolidation was already progressing within the Local Government Pension Scheme (LGPS) through asset pooling, which he said was approaching its “end stage”.

He also pointed to the government’s proposed 'megafund' reforms, which would require multi-employer defined contribution (DC) schemes to reach at least £25bn in assets under management.

"The megafunds proposals move all multi-employer schemes to being at least £25bn assets under management," Bell said.

"You can’t be a small pension scheme, broadly, anymore. Why? Costs are too high, ability to invest in a wide range of assets is too low, stresses on governance are harder to manage."

Explaining why schemes needed to reach that scale, Bell stressed that smaller funds struggled with higher costs, weaker governance capacity and limited access to a broad range of investment opportunities.

“Another reason is that active ownership is a really important part of good capitalism,” he added.

Indeed, Bell said that the UK has historically lacked strong active ownership in part because pension schemes have been too small to exert meaningful influence over the assets they invest in.

Discussing wider reforms expected under the proposed Pension Schemes Bill, Bell highlighted the government’s plans to introduce default retirement income solutions for DC savers.

“In 15 years’ time we can’t be in a situation where the norm is just taking a whole pension as cash - that will be a very bad outcome from a whole host of perspectives,” he said.

“That’s why the Pension Schemes Bill requires DC schemes to provide default pensions.

"Default pensions will be legally required in the next few years. People say politics doesn’t make a difference - it will make a difference on that.”

The minister also provided an update on the progress of pensions dashboards, revealing he had recently seen the dashboard himself.

“There are 700 schemes connecting, and it’s on track, with 60 million records,” he stated.

“User testing is well underway, and we need to make sure that when people have access, it delivers the right results.

“I am pleasantly optimistic about recent developments, but that doesn’t guarantee it’s all going to be plain sailing."

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