Today we’ve published Holding the purse strings, a new report by Karan Kalsi, one of our 2026 Policy Associates. In the report, Karan asks who controls the capital in workers’ pensions, and whether the people whose money it is have enough of a say. He suggests four routes to improving members’ representation so that ordinary people have more control over how their money is invested.
Through recent reforms, most notably the Pension Schemes Act 2026, the Government is pushing to merge pension schemes into fewer and larger funds. That seems sensible, since scale can improve investment capability and value for the members. Yet it can also put more economic power in the hands of a small group of trustees, financial providers and intermediaries.
In fact, research by Lane Clark & Peacock (LCP) has found that fewer than 50 people oversee more than half of all assets in trust-based defined contribution (DC) schemes, where pension pots depend on contributions and investment returns. More than £160 billion is concentrated in the seven largest master trusts, schemes that serve many unrelated employers at once. By Karan’s count, 23 of the 30 authorised master trusts have no member-nominated trustees. That is a tiny number of people controlling an enormously large amount of capital. The report makes the case that while recent reforms are welcome, they largely leave the control of this huge pool of capital unaddressed while increasing the consolidation of pension savings in DC funds.
Most trust-based workplace schemes must ensure that at least one-third of their trustees are nominated by members. These member-nominated trustees act as ‘caring insiders’. They often have their own savings in the scheme, hold intermediaries to account, and help to prevent groupthink on boards made up of people from similar financial services backgrounds.
However, master trusts are exempt from this rule and contract-based schemes have no equivalent route at all. So as more savings take place within these vehicles, member representation could be quietly disappearing. As Catherine Howarth recently outlined in Whose Capital?: “the governance of pension capital has not evolved alongside its growing scale and influence”, with savers bearing the risk of investment, but without a commensurate say in its direction.
Other countries show that member representation can work alongside scale and professional management. Australia’s large employer-sponsored funds operate on an equal-representation model. Meanwhile, in Finland, a third of board seats are reserved for representatives of insured employees.
So the UK faces an important choice about how workers’ pension wealth is governed, and whether it can catch up with these other countries. The UK has the third largest pensions market in the OECD and its decisions shape who owns British companies and how housing, infrastructure and clean energy are financed. Savers increasingly care how their money is used, with 40% saying they would increase their contributions if their pension was invested in line with their values. And, as AI and automation threaten to shift a greater share of economic returns from labour to capital, meaningful member representation will matter more than ever.
Pensions are one of the main ways in which working people own assets. In an economy where wealth increasingly matters more than income, there is a stronger case than ever for considering how the interests of ordinary workers are represented in those pension schemes.
In this report, Karan sets out a step-by-step route to a universal statutory floor of at least one-third member representation across all categories of pension schemes. As a practical first step, the Government could consult on reforming the relevant 2006 Regulations for existing master trusts, while ensuring that new consolidated schemes currently being developed also have this requirement.
Ultimately, any reform would be designed to give workers greater say, ensuring that pension schemes are accountable to the members they serve and to their interests.
Debates about economic fairness tend to focus on how we tax and redistribute the gains from wealth. Karan’s report is a reminder that how capital is governed also matters. Making sure that pension schemes answer to their members would be a good place to start.
REMINDER: ‘THE FAIR NECESSITIES’ LAUNCH EVENTS
Will’s book, The Fair Necessities: Why We Need a Fairer Britain and How to Make It Happen, is out and there are four more launch events coming up. The first is this Wednesday in London, and livestream tickets are available as well as in-person; the other three are in-person only. We’re also planning an event in Manchester in early December - watch this space!
London (LSE): Wed 14 Oct, 18.30 - 20.00
Oxford: Thu 22 Oct, 18.00 - 19.00