Influential think tank the Pensions Institute says by 2020 the auto-enrolment market will be dominated by just 10 providers.
In a report published today, in association with insurer Phoenix, the Pensions Institute says while assets are set to double to £550bn, the number of active providers will plummet.
It predicts 90 per cent of auto-enrolment assets will be held by a maximum of 10 providers.
Currently there are around 10 life companies with contract-based schemes and around 70 master-trust products.
The report says there will be a “massive expansion” in back book consolidation.
It adds the auto-enrolment market will become unstable if Government and regulators “do not dedicate resources to overseeing the anticipated spike in M&A activity”.
In addition, if the Government opts to move pensions tax relief to an Isa-style system this would eliminate “of the few remaining benefits of the traditional life company business model”, the report says.
Pensions Institute visiting professor Debbie Harrison says: “By 2020 several well-known life companies will no longer exist in their present form, or at all.
“Some will be bought wholesale by more competitive life companies; others will be sold off piecemeal as a series of books of business.
“At this watershed in the long history of UK life companies, clarity of understanding of market conditions, together with a clear vision for the future, is essential for survival.”
Phoenix Group chief executive Clive Bannister says: “Some of the findings and questions will be uncomfortable reading for life companies of open and closed books of business, but the industry needs to acknowledge and address them.”
Hargreaves Lansdown head of corporate pension research Nathan Long says: “This introduces yet another item for employers to consider when designing their workplace pension.Not only should they strive to use a provider that is at the top of the tree now, but will continue to be supportive to employees in the years to come.”