A new report published by investment manager BNY Mellon has identified administration, risk control and competitive fees as the three key critical considerations for DC pension schemes selecting a platform provider in the UK.

The new report, which was written in association with Cerulli Associates and is entitled The Future of UK DC Pension Platforms, notes that the workplace savings market in the UK is currently going through the most radical period of change in a generation.

Developments and innovations in full service 'bundled' platforms – the infrastructure allowing pension schemes to receive administration, investment and communication services combined – will play a defining role in the future delivery of workplace savings provision, the manager predicts in its report.

"Pensions and benefits managers must ensure their chosen platform providers can offer the appropriate range of at-retirement solutions or linkages to other providers as appropriate. At the same time, platform providers themselves need to align their products to better meet the changing needs of pension schemes," BNY Mellon states.

David Calfo, group head of DC Strategy at BNY Mellon, said: "The industry has reached a watershed. Developments initiated in the next 12-18 months will have a lasting effect on shaping its future. Several legislative initiatives, from auto-enrolment to the Retail Distribution Review (RDR), have created further impetus for all those involved to review their existing models."

The introduction of auto-enrolment will over time likely precipitate a large influx of additional pension contributions due to anticipated higher levels of take-up and is also prompting employers to review their existing pension scheme provision for their workforces. At the same time, there is also likely to be an increased shift from unbundled to bundled offerings to allow pension schemes to harness cost savings and improve administrative efficiency.

The report highlights a number of key findings:

- Platform providers will need to build dependable and scalable administration systems to capitalise on the expected shift in the market; 

- Deep pockets will be essential to success and this will need to be balanced with the need to achieve profitability in an acceptable timeframe;

- Platforms will need to monitor spending closely and segment their client base by targeting the most profitable lines of business and scheme types;

- It will take persistence and dedication to yield the long-term benefits inherent in this market;

- Consultants and corporate advisers will retain a significant role in the highly intermediated pensions industry with their roles continuing to evolve.

Fifty-four UK pension schemes participated in the survey, representing £175bn in pension assets under management. For the consultant element of the survey, 12 firms took part, encompassing the three global giants as well as a mix of the large and medium-sized local players.

The full report can be found here.