People’s Pension Finds Scale Can Boost Returns

People’s Pension is positioning itself as a large-scale asset owner at a time when the UK retirement market is shifting from cost-only thinking to broader investment capability.

Why scale alone isn’t enough

Chief investment officer Dan Mikulskis notes that consolidation and auto-enrolment have created institutions with unprecedented asset bases, but size does not automatically translate into better outcomes for members.

To explore the gap between scale and performance, People’s Pension partnered with Invesco to review more than 70 international studies. The analysis searched for patterns that could guide emerging UK owners toward effective governance and decision-making.

One recurring theme is the “asset ownership premium.” While not universal, several credible studies show that larger, more sophisticated owners can generate an extra 0.25% to 0.75% annual return compared with a passive benchmark at similar risk levels.

That modest edge compounds over a career. A 0.5% annual lift could add roughly £100,000, or about a 35% increase, to a typical retiree’s pot by the end of working life.

Beyond pension balances, stronger owners tend to allocate more capital to private markets, potentially channeling long-term funding into productive domestic projects.

International examples also reveal that no single operating model guarantees success. Some schemes run most investment functions in-house, while others keep lean teams and rely heavily on specialist managers.

What matters, according to the report, is a clear division of responsibilities: retaining strategic control while outsourcing execution where it adds value.

In the UK context, this “hybrid” approach means they keep accountability for key decisions but partner with a limited set of external experts for tasks such as index tracking, dealing and order management.

Ownership, therefore, is less about who does the work and more about who is answerable for the result.

Domestic strengths should not be overlooked. The UK’s defined-contribution system has delivered average annual returns above 9% over the past decade, often outpacing comparable Canadian and Australian schemes.

These figures stem from a long-standing emphasis on low-cost, liquid investments that prioritize value for members.

Many UK schemes now grapple with questions about infrastructure exposure, private-equity allocations, or building direct-investment teams. The report argues that those tactical debates should follow a deeper strategic choice about the organisation’s overall investment philosophy.

In practice, it decides early to act as a genuine long-term owner and will shape its governance, talent recruitment and partner selection around that identity.

Building capability over scale

The research points to a shift from cost-only objectives toward building teams that can evaluate complex assets and manage long-term risk.

One observation from the study is that institutions that invest in talent and analytical tools tend to outperform peers that rely solely on external managers. By developing internal insight, a scheme can better assess opportunities and negotiate more favorable terms with partners.

Governance and the hybrid model

The hybrid approach described in the research separates strategic oversight from routine execution. Ownership rests with the scheme’s board, while a limited set of specialist firms handle tasks such as index replication, trade settlement and compliance monitoring.