There’s a massive concentration of power in occupational pensions with less than 50 people controlling more than half the money, according to former Pensions Minister Steve Webb.
The trustees of the seven largest Master Trusts control more than £160bn worth of DC pensions, he said.
Mr Webb, partner at consultants LCP, warned that the group’s share will be even larger following the announcement of the takeover of Aegon by Standard Life.
LCP’s new report ‘Pension Powerbrokers 2: The DC generation’ is based on interviews with 15 senior figures from a range of different types of scheme.
It warned that the drive to mega funds, where schemes typically serve thousands of employers and millions of workers, risks a loss of employer and member voice in the running of schemes compared with the world where many companies had their own pension scheme for their own employees.
Mr Webb, said: “The increasing concentration of power in the hands of a small number of trustees is extraordinary.
“While these individuals will be carefully chosen and typically highly expert, the model of having a handful of people overseeing huge ‘mega funds’ raises serious questions which the government has not so far addressed.
“In particular, much more needs to be done to make sure that there is proper accountability of trustees by employers and scheme members, and that there is scope for innovation and challenge in these enormous financial institutions.”
The report warned that we are witnessing an “extraordinary” consolidation of power in the hands of a remarkably small number of people. That raises issues such as how can we ensure diversity of thought and behaviour, when some mega funds are overseen by just four or five people?
The report also raised concerns about the balance of power between the small group of trustees on each scheme and the pension scheme provider.
• The report was based on analysis of data on scheme assets, alongside 15 in-depth interviews with key industry figures, including trustees and providers of Master Trusts.