DC pension consolidation continues as membership growth slows

Consolidation in the defined contribution (DC) pension market has continued over the past year, whilst growth in DC scheme membership has slowed, according to data from The Pensions Regulator (TPR).

In particular, whilst the figures revealed that DC trust-based scheme membership increased 11 per cent amid the Covid-19 pandemic in 2020, this was lower than the 17 per cent rise in the previous year.

However, the continued growth has nonetheless resulted in an 812 per cent increase in the number of people saving into a non-hybrid DC master trust since 2012, rising from 270,000 to just over 18.6 million people.

Deferred memberships have also increased by more than active memberships over the past year, increasing by 19 per cent and 2 per cent respectively.

In addition to this, average assets per member have also bucked trends, increasing by 10 per cent over the past year, in contrast with a previous trend of decline which has been seen since 2013.

Indeed, despite the growth in assets per member recorded over the past year, TPR emphasised that assets per member are still down 75 per cent since the beginning of 2012.

Average assets per member at retirement have also fallen 3 per cent since the beginning of 2020 to £5,300, representing a 73 per cent fall since the beginning of 2015.

The number of DC schemes, however, has continued to drop, with the total number of non-micro schemes, including hybrid, falling 10 per cent over the past year, equal to a 66 per cent fall since 2010.

The number of micro and non-micro schemes, excluding hybrid schemes, also fell by 3 per cent during the period.

Commenting on the figures, Hargreaves Lansdown senior analyst, Nathan Long, said: “Ever since the launch of auto-enrolment accelerated the seismic shift into DC pensions, we’ve seen membership of trust-based DC schemes soar, and the assets per member tumble. This year the pandemic changed both.

“Auto-enrolment boosts membership of these schemes every year, and the 2020/21 tax year was no different, but the pandemic slowed the rate of new joiners - partly because people started new jobs less often, which means fewer being enrolled into schemes.

“Meanwhile average assets per member rose significantly. This is partly because global stock markets have held up rather well, despite wobbles in the early part of 2020 and also because support from the government enabled contributions to continue flowing in.

“Unfortunately, it hasn’t made an enormous difference to those at retirement, although we’d expect to see the impact filter through in the years ahead. They saw their assets at retirement fall 3 per cent in a year to just £5,300."

He added: “Scheme members have benefited from the rising tide that lifted all boats, but they could do much better. The vast majority of people in these schemes fall into the default investment strategy.

"And while that’s generally considered to be averagely suitable, it isn’t tailored to your needs. It’s essential that we all get better acquainted with our pension and investments, so we can be sure we’re targeting the right level of growth for us, whatever is happening in the wider markets.”

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