UK pensions maintain leading position amid institutional market shifts

Pension assets remain the single largest institutional client segment for the UK investment management industry, accounting for £2 trillion (51%) – according to the Investment Association's latest Investment Management Survey. Total assets managed by its members on behalf of UK institutional clients stood at £3.8 trillion at the end of 2024. 

Workplace defined contribution (DC) assets continue to grow as a proportion of pension fund assets, as DC assets under management (AUM) rose to £650 billion last year,1 marking a 40% increase since 2019. The report suggests that consolidation in DC assets will support even greater growth, particularly as larger capital pools are better placed to invest in illiquid, long-term vehicles. Individual and self-invested DC arrangements also rose from £750 billion to £820 billion.2 

This underscores a structural shift in the pensions market as DC becomes the dominant form of scheme, while many defined benefit (DB) schemes wind down, with the survey reporting that these assets fell 12% to £1.7 trillion, compared with £1.9 trillion in 2023.3 In addition to the reduction in DB assets, the survey finds that the changing composition of the pensions market is largely attributable to a contraction in corporate pension schemes, which declined to 43.1% from 47.3% over the past year. 

On the other hand, Local Government Pension Scheme (LGPS) assets remained resilient and continued to grow each year, reaching £415 billion by the end of 2024.4 Unlike corporate DB schemes, the LGPS is open to new members, meaning it benefits from ongoing employer and employee contributions. As LGPS continue to consolidate, guided by the principles of sophisticated scale – achieving the benefits of greater size whilst maintaining investment expertise and robust, accountable decision-making structures – there is potential for the asset class to continue unlocking sustainable returns for scheme members and drive further growth.  

However, in what was a turbulent twelve months for global markets, characterised by significant geopolitical upheaval, the survey found that pension fund assets fell sharply in 2024 with institutional assets under management falling by almost five percentage points to 51.2%.  

Miranda Seath, Director of Markets Insight & Fund Sectors, said:  

“2024 marked a period of evolution for the UK pensions market. The wider UK investment management sector has shown real resilience — with strong demand at home and abroad driving AUM to a record £10 trillion in 2024. However, the story for pensions was more complex. Although pension funds remained the largest institutional client base, if we look closer, a shift in the balance between DB and DC pensions is clear.  

“Primarily, the interest rate environment prompted changes to the institutional client mix. Higher interest rates again helped more DB schemes to achieve full funding, shifting institutional assets away from pension funds to insurers as the assets de-risk in the pension transfer market. This was partly reflected in the decline of pension fund assets and a rise in the percentage of assets managed on behalf of insurance clients. 

“That said, workplace defined contribution assets continue to grow. If the UK pursues policy reforms that unlock the benefits of ‘sophisticated scale’ in the LGPS and DC sectors, it can unlock new opportunities to deliver sustainable investment returns for savers and deploy productive capital to support economic growth. 

“As the UK’s pension system evolves and the risk of under saving for retirement is borne by the individual, the IA has called for greater saver engagement with their retirement choices and a stronger focus on retirement outcomes.”