This is the fourth of a series of articles from KGC Associates. Once again thanks to Hayley Mudge.

What consolidation means for system-wide resilience

Across the UK pensions industry, administration has historically been treated as a supporting function, essential, but largely invisible when it works well. Structural change in the administration market is challenging this assumption. As providers consolidate, platforms concentrate and capacity tightens, member outcomes are increasingly exposed to the shared dependencies within administration across the system.

These developments matter beyond individual schemes or providers. Consolidation and exit have concentrated operational risk within a smaller set of organisations. At the same time, the people, processes and transition capability required to deliver administration are increasingly shared across the market. This means disruption in one part of the system can have indirect consequences elsewhere, even where direct relationships remain unchanged.

From an industry perspective, this raises questions about resilience, sequencing of change and collective capacity. The issue is not whether consolidation is rational, in many cases it clearly is, but whether the market as a whole retains sufficient ability to absorb change without increasing risk to service continuity, member confidence and industry reputation.

This section considers what it means to view pensions administration as critical infrastructure rather than a routine outsourced service. It explores why operational risk has become more concentrated, how regulatory interest is beginning to reflect this shift, and why resilience now depends as much on coordination and governance across the market as it does on the performance of individual firms.

Administration has become a control point in the pensions ecosystem

Administration now sits at the intersection of:

• data custody
• member experience
• regulatory compliance
• scheme decision-making

It’s no longer about retirement calculations or transfer quotes, administrators have needed to diversify their skillsets away from following processes and calculations to being a sympathetic ear to a bereavement case, understanding how to deal with a pensions scam and being able to interrogate data alongside trustees. Administration has earnt its place at the table and is finally being valued in line with investment decisions and advice from the Scheme Actuary.

KGC insight:

This elevates administration from a back-office function to systemically important operational infrastructure, requiring a corresponding shift in trustee governance, sponsor oversight and regulatory focus.

Considerations for trustees:

If administration is critical infrastructure, then it must be governed, invested in and overseen differently than routine business process outsourcing:

• Administration risk is no longer just a supplier-management issue, it’s a core governance risk, alongside funding, covenant and investment
• Trustees should treat administrator stability and capacity as standing agenda items, govern ownership change, platform change and transitions proactively and be more strategic in their questioning. For example, instead of ‘are we getting good service?’ ask ‘is our administrator structurally resilient?’
• Scenario plan the consequences of administrator ownership change, restructuring or exit for them, the sponsor and their members

Considerations for sponsors:

This reframes administration from an outsourced cost to a critical operational dependency. Administration failure is no longer an operational inconvenience, it’s a business and reputational risk, sponsors need to:

• Understand how administration failure or instability affects payroll, member trust and reputational risk
• Scenario plan the consequences of administrator ownership change, restructuring or exit for them, their trustees and members

Considerations for Regulators

As pensions administration underpins benefit accuracy, payment continuity and member outcomes, disruption increasingly has cross-scheme consequences rather than isolated impact. Regulatory interest is already beginning to reflect this shift. There is growing recognition:

• Provider exits and consolidation concentrate operational risk
• Large-scale migrations amplify delivery and data risk
• Capacity constraints limit the pensions ecosystem’s ability to absorb change

Regulatory focus is moving beyond individual service failures, towards the resilience of the administration ecosystem supporting member outcomes.

New entrants only emerge from disruption, but there is interest from overseas

Alongside disruption-driven entry, we continue to see interest from overseas-owned groups seeking to access the UK pensions administration market, either through acquisition or direct entry. However, there are high barriers to entry in modern administration.

In practice, many prospective entrants underestimate the structural complexity of the UK environment, particularly the deep operational interdependence between DB and DC administration. For organisations accustomed to more homogeneous, DC-only markets, the UK’s long tail of DB schemes, with benefit-specific rules, historic data challenges and scheme-by-scheme customisation presents a material barrier to scale, operational clarity and risk control. This has historically constrained successful greenfield entry.

As the market continues to tilt towards larger-scale DC arrangements and master trust administration, there are early indications some of these barriers may be weakening. Platform-led propositions, including newer administration platforms entering the UK market suggest prospective entrants are seeking to decouple technology from legacy UK operating models, rather than replicate traditional administration structures wholesale. Whether this approach can translate into sustained competitive entry remains to be seen, but it indicates a gradual shift in the structural dynamics historically limiting overseas participation.

As DB becomes a smaller proportion of new business, future entrants may find the market more accessible. Sustainable participation in the UK market currently still depends on:

• demonstrable DB capability
• disciplined migration and transition governance
• experienced people and resilient delivery models

KGC insight:

The market is mature and operationally complex. Innovation tends to come from restructuring existing capability rather than genuine greenfield entry. The UK administration market has not lacked overseas interest. It’s lacked operating models capable of absorbing DB complexity at scale. Although technology may lower barriers to entry, it does not remove multi-layered operational demands.

In our experience, increased overseas and platform-led interest does not reduce procurement risk, it changes its shape. Selection decisions with over-weighting on technology or price, without evidence of delivery through UK-specific change and complexity, could materially increase transition and service risk.

Risk has concentrated, not disappeared

While the number of providers has reduced, the scale of individual administrators has increased significantly, each one:

• supports more members
• holds more legacy data
• runs more migration simultaneously

Systemic risk is now concentrated, a major platform and/or business failure would affect:

• hundreds of schemes
• millions of members
• multiple trustees at once

KGC insight:

From a system-wide governance perspective, the industry now carries more concentrated operational dependency than it did a decade ago. Resilience depends not just on individual organisation performance, but on collective standards, transparency and operational discipline.

Bringing this together: resilience at system level

Viewed through an industry lens, the evolution of the administration market points to a clear shift in where operational risk now sits. Administration has moved from a largely invisible supporting function to a central control point within the pensions ecosystem, underpinning data integrity, regulatory compliance, member experience and scheme decision-making.

Consolidation, exit and platform concentration have not eliminated risk, they have redistributed it. As providers grow in scale and complexity, and as capacity, skills and transition capability become increasingly shared, the consequences of disruption extend beyond individual schemes or organisations. The ecosystems resilience now depends not only on the performance of individual administrators, but on how change is sequenced, governed and absorbed across the market as a whole.

As regulatory interest continues to evolve in this direction, and as trustees and sponsors reassess their own dependencies, the focus increasingly shifts from isolated service outcomes to system-wide resilience. The question for the industry is no longer whether administration can scale, but whether it can do so in a way that sustains confidence, continuity and member outcomes over time.

The Bigger Picture: The next phase of market evolution

The UK pensions administration market has consolidated structurally but we believe it remains operationally fragile during periods of change. While the number of providers has reduced, the complexity, scale and interdependence of administration activity has increased. Risk has not been removed; it has become more concentrated and, in some cases, less visible.

Consolidation has brought clear benefits. It has enabled greater professionalisation, investment in systems and controls, and the development of specialist capability. At the same time, it has increased reliance on a smaller number of delivery platforms and organisations, each supporting larger member populations, holding more legacy data and managing multiple, overlapping transitions. This concentration is largely unproblematic when change is limited, but it becomes more exposed when the market is absorbing exits, migrations or operating-model redesign.

For trustees, this elevates administration oversight from a supplier-management activity to a core governance responsibility. The quality of BAU remains important, but it’s no longer sufficient as a proxy indicator for long-term resilience. Administration risk now has a direct bearing on member outcome and scheme risk.

For administrators, consolidation sharpens the importance of strategic clarity and operating discipline. Scale alone does not guarantee stability. Resilience appears more closely linked to how clearly administration is positioned within the business, how consistently investment is sustained, and how deliberately change is governed and absorbed over time.

For the industry, these dynamics underline the extent to which administration now functions as critical operational infrastructure. Disruption no longer affects individual schemes in isolation. Capacity constraints, large-scale migrations and provider exits have cross-scheme consequences. There should be an appreciation of shared dependencies and standards across the market.

In our view, the next phase of market evolution will be defined less by the pace of further consolidation and more by how effectively the industry governs and absorbs change