David Brooks – Head of Policy at Broadstone – said: “The TPR data reveals the significant extent of consolidation in non-micro defined contribution pension schemes over the past decade with the number of occupational schemes dropping by two-thirds from over 3,660 in 2012 to less than 1,220 at the start of this year.
“In contrast, membership has shot up as auto-enrolment has funnelled more and more savers into pension schemes with over 26 million people now members of occupational DC schemes – a 13% increase compared to the start of last year. The vast majority (98%) of these people are members of schemes with over 5,000 members as consolidation and master-trusts increasingly dominate the sector.
“Auto-enrolment created a nation of pension savers, which had a natural drag on average pot sizes as millions began their accumulation journey from scratch. However, it is pleasing therefore that we are now seeing average assets per membership start to tick up with an increase of 11% over the past year as the ratcheting up of minimum contributions starts to take effect.
“The risk to auto-enrolment remains complacency around low contribution rates which is why we’re so disappointed by the government’s rejection of MPs calls for a timetable setting out further increases to auto-enrolment contributions. It is a golden opportunity missed to capitalise on the burgeoning success of the programme and set workers on course for more comfortable retirements than is currently expected.
“We know the government is keen for more pension assets to be invested into infrastructure, unlocking this capital for the future of the country. However, the statistics show that 97% of members use the default fund where we know Trustees are often reluctant to allocate towards infrastructure. This is the extent of the government’s challenge when making the case that infrastructure investments will create value for members.”
Tim Box, Senior Consultant at LCP, said: “While it’s encouraging to see a large increase of 26% in DC scheme assets to a total of £143bn, it doesn’t hide the fact that average assets per member is still under £6000 which will simply not provide a comfortable retirement for anybody. Therefore further reform and innovation of the DC pension marketplace, covering issues such as implementing the 2017 Auto-enrolment review, further work on including illiquid assets in DC portfolios, improving DC decumulation outcomes and solving the small pots problem is still needed. We look forward to working with government and the rest of the industry in addressing these areas in 2023.”
|
