Under Pressure: Managing Change Across UK Pensions
Managing Change
There is a great deal of change being worked through in UK pensions, across Defined Benefit, Defined Contribution and Local Government Pension Schemes.
The implementation of many of these changes – LGPS consolidation, minimum size requirements for DC providers, and new DB end-game dynamics driven by potential surplus release options – are likely to require strategic and governance changes for the organisations affected.
Whilst much of the recent focus regarding the upcoming change has been on investment challenges, such as accessing private markets, mega-fund size/capacity constraints, or getting DB portfolios “buy-out ready” versus running-on, the challenges related to strategy governance are equally significant.
Across DC, scaling for rapid growth presents governance challenges; an organisation requires a fundamentally different set-up above a certain size, compared to a smaller business:
Governance set-up: expansion of roles and responsibilities, potential requirement for additional management layer;
Internal processes: smaller businesses can be run effectively with relatively little formality versus a larger entity;
Infrastructure: including technology;
Personnel: the need for rapid hiring, potentially in areas that are new to the organisation, and related to this;
Firm culture: how do you retain what is good and different about the organisation despite the influx of new colleagues?
Under normal circumstances, business growth can be a challenge, but the DC sector has the added pressure of minimum size deadlines in 2030 and 2035 to meet. Related to this, Avida’s Mike Weston has written about the considerations for in-sourcing asset management here - ‘Insourcing makes sense as assets increase, but beware of the disadvantages’.
Ongoing changes to the LGPS landscape are arguably even more dramatic; consolidation of pools, alongside further insourcing of investment management and advisory functions, and increasing governance requirements will mean significant changes in the way in which pools are run and the level of internal resourcing needed. The aim is to achieve economies of scale and wider investment opportunities, with a particular focus on UK (both national and local) investing, through the creation of six “mega funds” which are to have their own FCA-regulated investment management company.
Similarly to the DC world, these changes come with a deadline from government: assets are to be consolidated in the mega-funds, and various new governance and training requirements are to be complied with, by March 2026 – an extremely challenging deadline given the sheer scale of the assets and nature of the required changes.
In the DB world, governance challenges are more nuanced, depending on the route a scheme is taking, for example:
If a scheme with in-house resourcing intends moving to buy-in/buy-out in the foreseeable future, how does it retain/reward/motivate existing staff during this period?
If a scheme chooses to pursue surplus release, what is the mechanism for managing the potential conflicts around decision-making, and weighing the competing considerations?
For the majority of DB schemes that are closed to new members and therefore expected to shrink over time, what is the appropriate governance set-up and how should that change over time?
If you are moving to (or from) Fiduciary Management / Outsourced CIO, what should this mean for your governance arrangements?
There are other developments becoming more mainstream for DB schemes, such as commercial consolidators, which will also require complex decision-making by trustees.
And the changes won’t stop there… with the recently revived Pensions Commission now kicking off their consideration of the long-term future of the UK’s pensions system with a view to making today’s workers better off in retirement, more developments are afoot.
How Avida can help
Avida supports pension organisations navigating strategic and governance transformation across all segments of the UK market — DB, DC, and LGPS. We help clients assess their current governance structures, benchmark them against best practice, and design fit-for-purpose models that reflect future scale, complexity, and regulatory demands.
Our team of senior industry experts has deep experience guiding clients through transitions such as insourcing, scaling operations, board redesign, and fiduciary oversight.
Whether you’re preparing for LGPS consolidation, rapid DC growth, or defining your DB end-game strategy, Avida provides independent advice and hands-on support to help you manage change with clarity and control.
