The running costs of defined benefit schemes jumped alarmingly over the past year, according to the Pensions and Lifetime Savings Association (PLSA).
Since 2015, the mean running cost of DB schemes has increased by 37 per cent from £400 to £546 a member, according to the PLSA's latest annual survey of members.
This is largely driven by increases in fund management and custody costs, which are up 32 per cent over the past year.
Smaller schemes - those with 5,000 or fewer members - have seen the greatest increase in running costs with an average increase of 63 per cent, to £787 a member.
Joanne Segars, chief executive of the PLSA, said the figures highlighted the urgency of pension scheme consolidation.
She said: “Our DB taskforce is currently collaborating across the pensions sector to develop recommendations on how we can change the industry to improve outcomes for members and schemes.
"With over 6,000 private sector DB schemes in the UK the taskforce will explore the potential of scheme consolidation to deliver better value to scheme members and sponsors.”
She added higher costs put schemes that are in deficit at greater risk of default.
If a DB scheme defaults and enters the Pensions Protection Fund members can end up losing between 15 and 20 per cent of accrued benefits.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said he was aware of the large gulf in costs between running large and small defined benefit schemes and that the PLSA's data highlighted the need for a consolidation of smaller DB schemes.
He said there was growing momentum from regulators, trade unions and government for such change, not least as many smaller schemes were closed to new members and were now largely catering for ex-employees, cutting the traditional link between sponsors and members.
The survey from the PLSA also recorded trends across defined contribution schemes, where it found the average employee contribution rates remained at 4.2 per cent (the same as 2015) and employer contribution rates sat at 7.9 per cent (8 per cent in 2015).
The average annual management charge across all schemes surveyed was 0.4 per cent.
