Private/Corporate Pension Funds

Private pension investors, particularly those managing occupational pension schemes in the private sector, play a critical role in global capital markets. But while they represent one of the largest pools of long-term capital, they also face a complex and evolving set of challenges that continue to reshape how they operate and invest.

One of the most pressing issues is the weight of regulation. Defined benefit (DB) schemes, in particular, must contend with increasingly tight oversight from regulators like The Pensions Regulator (TPR) in the UK. There’s mounting pressure to reduce risk and ensure schemes remain adequately funded to meet long-term liabilities. For defined contribution (DC) schemes, regulation is also intensifying, especially with the emergence of Consumer Duty rules, which demand clearer demonstrations of value for money and better governance of investment defaults and member communications. The regulatory burden is shifting from not just protecting assets but also ensuring that members receive good outcomes.

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Demographics pose another persistent challenge. People are living longer, which might seem a triumph of modern life, but for pension schemes it introduces more risk. DB schemes must contend with larger and more uncertain future payouts, while DC schemes face the very real risk that individuals will outlive their retirement savings. This longevity risk is pushing pension schemes to rethink both accumulation strategies and how they support members through decumulation in retirement.

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Adding to this is the macroeconomic backdrop. In a lower yield environment, generating sufficient returns has become far more difficult. Inflation—whether transitory or persistent—undermines the real value of both investment returns and pension payouts. For DB schemes, this complicates liability matching. For DC savers, it threatens the purchasing power of their retirement income. Income-generating assets, such as infrastructure or private credit, have become more important in addressing these pressures, but they also introduce complexity and governance demands.

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Cashflow is another key concern, particularly for maturing DB schemes. As more members retire, many DB schemes are now cashflow negative, meaning they need to generate sufficient income or begin selling assets to meet their obligations. This dynamic has fuelled a greater focus on income-generating investments and liability-driven investing (LDI), but it also increases exposure to liquidity risk and market timing. Meanwhile, DC schemes struggle with the opposite problem: how to build scalable, cost-effective retirement income strategies in a world where individuals are responsible for managing their own decumulation path—often without advice.

Governance capacity further complicates matters. Many pension trustee boards, especially those of smaller schemes, lack the in-house expertise or time to manage increasingly sophisticated investment portfolios. Alternatives, ESG integration, and private markets may offer attractive diversification and return opportunities, but they demand a high degree of oversight and operational rigour. For many schemes, particularly smaller ones, accessing these strategies on favourable terms is a significant barrier.

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This brings into focus another trend: consolidation. In the DC market, smaller schemes are increasingly folding into larger master trusts, driven by the need for better governance, scale efficiencies, and improved member outcomes. The DB space is seeing similar movement, with the rise of superfunds and consolidators offering a potential endgame for schemes that can no longer operate efficiently on their own.

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Finally, for DC schemes, member engagement remains a longstanding and unresolved issue. Many members don’t engage with their pension savings until it’s too late. Contribution rates are often too low, investment choices are poorly understood, and decisions at retirement—where to invest, when to draw down, whether to annuitise—are frequently made with little guidance. While product innovation and digital tools have helped, improving financial literacy and long-term engagement remains a critical hurdle.

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These overlapping challenges—regulatory, demographic, economic, operational, and behavioural—are pushing private pension investors to evolve. Whether through improved default design, access to diversified assets, or outsourced fiduciary solutions, the direction of travel is clear: more sophistication, more scale, and a stronger focus on delivering real, sustainable outcomes for members over the long term.