The call from the minister was backed by the London Pensions Fund Authority, which supports pooled funds.
A spokesman from the LPFA cited “significant potential savings in administration and fees”, as well as improvements in investment returns from consolidating funds.
The spokesman also pointed out that academic publications have repeatedly highlighted the “governance dividend” attributed to larger schemes, having higher standards of expertise, advice and governance.
He added that creating proper economies of scale – which he called “superpools” – would result in billions of pounds’ worth of housing and infrastructure investment across the UK, which might otherwise not be available, creating jobs, boosting local economies and improving the country’s infrastructure.
It is expected that the minister will make a decision about pension funds this December.
Minesh Patel of London-based EA Financial Solutions, said: “Pooled funds are a good idea. The economies of scale are a brilliant approach and you can diversify across different managers. The complexity needs something more robust in structure than exists at the moment. Pooling into one process is much more efficient and incurs less risk than the current approach.”