A glut of private sector competitors to the National Employment Savings Trust (NEST) could have a negative long-term impact on savers, an actuary warns.
His comments come as the industry gears up for auto-enrolment in 2012 with many preparing master trusts for employers keen to outsource their trusteeship.
Danish provider ATP announced in September it will be launching its NOW pension in the UK to compete with the government scheme as well.
However, Chris Roberts, a consultant at actuarial firm Spence and Partners, said too much choice in the master trust market could cause huge problems for savers later on.
"Competition is a good thing for individuals in the short term," said Roberts.
"NEST is simple so other providers will have to create good, simple systems to compete.
"But these schemes need large volumes of members to work. In the long term, if there are a lot of schemes and they do not get enough members, they will have to close."
Roberts said this could lead to scheme closures, which will require members to transfer to other schemes or leave them with small, stranded pension pots.
Major insurers are also reconsidering the master trust market with Friends Life saying it is investigating demand in the area.
Meanwhile, Legal and General has confirmed several large employers including Marks & Spencer have signed up to its master trust product.
XPT, Supertrust UK, Spinnaker, BlueSky and The Pensions Trust all currently offer master trusts.
A question of selectivity
Watchdog interviewed 13,000 people
Debate over loyalty bonuses
Women more than half (54%) of workforce