There are now around 14.8 million memberships in DC schemes compared with 11.7 million in DB arrangements.
Andrew Warwick-Thompson, Executive Director for Regulatory Policy, said: “We have now passed a significant point in UK private sector pensions provision with 55% of all private sector pension scheme members and 85% of active members being participants in DC schemes.
“This transformation is the direct result of the success of automatic enrolment (AE) which has seen more than 7 million workers join a pension scheme for the first time.
“Master trusts have played a major role in the success of AE and so the introduction of a mandatory authorisation and supervision regime via the Pension Schemes Bill is vital. We need to ensure a level playing field for the protection of consumers investing in contract-based and trust-based multi-employer pension plans, and it is clear that market forces alone would not have achieved this outcome.”
There are now 34,500 DC schemes, a fall of only 2% on last year. Most of these, 32,000 schemes, are ‘micro schemes’ with between 2 and 11 members, and of these around 23,000 are ‘relevant small schemes’ (commonly called SSAS).
Relevant small schemes are subject to minimal legislative duties, compared to those applicable to larger schemes. Of most concern to TPR is that of the 750 DC schemes being used for the purposes of AE, 360 fall into this ‘micro scheme’ category.
Mr Warwick-Thompson added: “Our concerns are rising about the fragmentation of DC provision and the persistence of a tail of sub-scale schemes. In our opinion, these pose an unacceptable risk to consumer protection. The consolidation trend we have observed and welcomed in previous years has slowed.
“We strongly believe that it is unacceptable to have two classes of DC pension saver – those that benefit from the premium of scale and good governance and administration, and those that do not. Our approach to resolving this issue will be threefold.
“We will launch details of the implementation phase of our 21st Century Trustee initiative later this year, with a clear objective to raise standards of trusteeship and take regulatory action against those trustees who persist in failing to meet the required level of competence.
“Through the introduction and implementation of the new authorisation and supervision regime for master trusts we will seek to create a secure, scalable and value for money cornerstone of the multi-employer DC savings market. We recognise there are some barriers to consolidation in the DC market, such as the requirement for actuarial certificates, and so we support the Government’s recent call for evidence on ways of removing these barriers.”
Other key findings of the DC Trust report include:
DC scheme volumes are stabilising, with a reduction of just 2% in the past year, though the number of schemes with 12-plus members has declined by 8%
in 2009 only 66% of schemes had members aged over 50 – this is now 97%
there are 87 master trusts with DC members registered with TPR
membership has increased 42% since 2016, and by over 300% since 2009
56% of all private sector workplace pension members are in DC schemes, and almost 90% of all those currently saving are saving into a DC scheme
95% of members are in schemes being used for automatic enrolment.
730 schemes are being used for AE, up from 450 last year – almost half of these schemes have fewer than 12 members.
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