In the 2nd century Chinese shipwrights observed a structural marvel in the humble bamboo stalk: it survives impact because it is hollow yet divided by hard internal nodes. If one section is punctured, the rest stays dry. They applied this design to their junks, creating the world’s first watertight bulkheads.
Fast forward to 1911. Western hubris decided that size was a better safety feature. The Titanic had bulkheads but they were not capped at the top — designers left them open to accommodate grand dining halls and facilitate movement. Once the legendary fifth compartment breached, its fate was mathematically sealed; the “ice-cube tray effect” ensured the ship’s demise.
Today, in the pensions sector, I fear we could be repeating the mistake. We’re tearing out the bulkheads of our financial system in the name of efficiency, convinced that a ship this large is immune to sinking.
The government is pushing for pension “mega-trusts”, arguing that consolidating hundreds of smaller pension schemes into a few £25 billion-plus super-liners will lower costs and boost returns. All done in the name of helping and protecting the consumer, of course.
But bigger doesn’t automatically mean safer. It can mean that everything fails simultaneously.
And there are two additional potential harms. Firstly, consolidation creates systemic herding behaviour, which often culminates in a lack of choice. Secondly — and in my view, more sinister — it gives the government greater control over the investment in your pension.
The Financial Conduct Authority’s new traffic-light rating system will act as a regulatory funnel. Funds rated red or amber are effectively forced to align themselves with what qualifies as green. This will create regulatory culling, where some investment strategies are eliminated because they don’t meet standardised metrics.
And the assumption that the metrics will be healthy, or used effectively, should be approached with caution.
We’ve seen this move before. In the 1970s, while Harold Wilson’s government imposed price and wage controls, the Bank of England chased blunt monetary targets. The result was a lesson that still matters today. The economist Charles Goodhart warned that the moment a metric becomes a policy goal, it breaks — because everyone starts playing the target, not the reality.
Once the traffic lights are in place, we will see a uniformity of investment mandates through consolidation and a natural pursuit of that green light.
For the avoidance of doubt, the individual shares in which your pension funds invest matter a lot. When you’re rattling through your investment selection process online, or you’ve been presented with a report that’s 28 pages long and written in a language Morpheus, the god of dreams, would envy, you could be forgiven for failing to notice the small elements.
Perhaps you’ve done your best to select different investment houses, but savers can frequently become trapped in portfolios with remarkably similar holdings because of investment mandate overlap, leaving some portfolios almost identical.
I fear more of this is on the radar and heading our way.
Nowhere is this more evident than in sustainable investing. Ethical investing was sold as a way to “do well by doing good”. In reality these labels have been misused to such an extent that the term greenwashing has emerged. We observe hypocrisy in ethical indices that include oil giants such as ExxonMobil but exclude Tesla on arbitrary scoring.
If a fund prioritises political outcomes over your solvency at age 78, how safe it is should, in my view, be questioned. Pooling 86 local government pension schemes into eight mega-funds mirrors the pattern, but a streamlined state often blinds leadership to the dangers of over-centralising power.
Both the former Conservative and present Labour governments have actively pushed for pension funds to increase their exposure to UK private equity and unlisted assets.
In May 2025 Rachel Reeves expanded this initiative into a new voluntary agreement with large pension providers. Signatories agreed to allocate 10 per cent of their default funds to private markets by 2030, with 5 per cent specifically committed to UK investments. This includes private equity, venture capital, infrastructure and property.
The 17 signatories to this agreement represent roughly 90 per cent of the UK’s active defined-contribution pension market.
Retirement savings should be untouchable, yet here we are. As a financial planner, I’m deeply concerned with the blatant overt and covert ways governments try to access people’s pensions. These should be sacred vehicles. It’s a predatory assault on the very concept of financial independence.
You still have a choice — for now. The law has not yet compelled compliance, but it has made passivity expensive. What was once straightforward now demands vigilance, structure and intent. Navigating pensions is no longer about returns alone — it is about defending control before it slips away.
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We’ve been sold a dream of unsinkable efficiency in the name of protecting our pensions. But true resilience comes from the integrity and independence of the compartments. By destroying smaller pension funds and by overregulation, I fear we may be removing the bulkheads that keep society afloat.
Scale is not always safety. We need a system with more nodes and fewer fleet admirals.
When the iceberg appears, you don’t want to be on the biggest ship in the world, you want to be on the one that can stay afloat because its designers remembered the humble strength of the bamboo.
Jessica Cook is a partner in a financial planning practice