Key results include:
The number of memberships of DC pensions increased by 9% in the last year, but much of this is a growth in ‘deferred’ members;
TPR report that 9.9m people are actively saving into a DC master trust, but that such schemes have 26m memberships in total; this means that more than half of all members of a typical master trust are no longer actively saving with that schemes;
The trend of smaller DC schemes closing or merging has continued; focusing on ‘non-micro’ schemes (ie those with 12 or more members) there has been a further fall of 11% in the last year in the total number of DC schemes;
Volatile market conditions have contributed to a flat year in terms of the average size of DC pots;
Commenting, Tim Box, Principal in LCP’s DC research team said: “These figures show the continued importance of auto-enrolment in providing retirement security for the UK workforce. But reforms to extend the scope of automatic enrolment – first proposed in a 2017 DWP review - are now long overdue and are a key step to improving DC pot sizes.
TPR’s figures show that the occupational DC market continues to consolidate, with continuous year-on-year reductions in the total number of schemes. This suggests that suggests that the government does not need to “force” consolidation of schemes any further.
The figures also show the very large number of small pension pots across the pensions landscape, with an average pot size across all memberships of under £6,000. This highlights the urgent need to address the issue of fragmented pension rights scattered across multiple pension schemes – another issue where no practical action has been taken to tackle a longstanding problem.
The lack of progress on average pot sizes and the growing number of small pots is a sign of a pressing need to address fundamental problems with DC pension saving”.
Richard Birkin, Head of DC Pensions at Isio: “A rise in DC membership across the board should be applauded, especially when the cost-of-living could easily have reversed this positive trend and seen people cut back on pension saving. There are interesting discrepancies between different types of scheme, with the transition from own-trust to master trusts, and the uptake of the largest master trusts, not happening as fast as we might have expected, or at the pace the Government wants to see.
“Over time we expect to see a bigger shift to larger master trusts as the DC industry consolidates. But the more significant trend is the growth in average pot size, a result of increasing contributions and investment returns, but which can also naturally be expected as the DC market matures. As more people who rely more heavily on DC savings approach retirement, providing the right support and decumulation solutions will be one of the biggest challenges for the pensions and investments industries to overcome.
“To date, focus has been on the growth phase of pension saving, and the quality and choice of offerings for people transitioning to decumulation hasn’t been good enough. Innovation that delivers better products, strategies and member support is desperately needed.
“For DC schemes more broadly, one of the biggest challenges going forwards will be getting the investment mix right by focusing on member outcomes, sustainability and the integration of various initiatives and reforms, with the evolution of the default strategy a continuous priority.”
TPR Occupational defined contribution landscape in the UK 2023
|
