The Department for Work and Pensions (DWP) has revealed that whilst the typical assets under management (AUM) for multi-employer providers (MEPs) are around 100 times that of single-employer trusts (SETs), MEPs are typically less heavily invested in UK assets than SETs.

The research, which aimed to address knowledge gaps surrounding SETs, found that the median AUM for MEPs was £92.8m, compared to £9.8bn for SETs.

However, members of SETs tended to have larger pension pots than members of MEPs. with a median pot value of £35,000 and £4,200 respectively.

In addition to this, almost three-quarters (73 per cent) of the pension pots in MEPs had a value of less than £10,000.

There were some commonalities in terms of asset allocation, though, as the DWP found that a large majority of providers’ total AUM was typically invested in automatic enrolment default funds (86 per cent on average for MEPs and 77 per cent for SETs).

In addition to this, investments at 30 years to retirement (30 YTR) were heavily concentrated in non-UK publicly listed equities, accounting for an average of 71.4 per cent of providers’ largest default fund investments.

A relatively low proportion of default fund investments were in private equity (0.5 per cent) or infrastructure (1.3 per cent) at 30 YTR.

And despite the scale benefits seen in MEPs, the DWP found that MEPs were less heavily invested in UK assets than SETs at all points on the retirement pathway.

At 30 YTR, 11 per cent of MEP’s largest default fund investments were in UK assets, compared with 20 per cent of SET’s investments.

The DWP suggested that, at 30 YTR, this difference was primarily driven by different concentrations of investment in UK-listed equities, which accounted for 9.9 per cent of SET investments compared with 2.6 per cent of MEP investments.

However, at retirement, the difference between SETs and MEPs was instead driven by differing investment in listed UK cash/money market securities (17.1 per cent for SETs compared with 11.9 per cent for MEPs) and UK government bonds (17.6 per cent for SETs compared with 10.3 per cent for MEPs).

More broadly, the DWP found that annual management charges tended to be higher for MEPs than for SETs (median averages of 0.32 per cent and 0.24 per cent, respectively).

Changes to how such research is carried out could be seen in the future, as the survey also aimed to identify effective ways in which DWP could collect these complex types of information from pension providers.

In particular, the research revealed that smaller providers are sometimes dependent on third parties for detailed information relating to investment allocation, investment performance, and other similarly complex measures.

The DWP noted that smaller providers were not always able to source such information within the necessary timelines for this research study, suggesting that these dependencies need to be considered in future data collection exercises and in the framing of any future statutory reporting requirements.

The department also revealed that a small number of questions generated high levels of non-response amongst providers of all sizes.

In particular, questions relating to accumulation and decumulation charges went unanswered by most providers, suggesting that qualitative research would be needed if this were to be a focus of any future analysis.

"Where possible, any future research studies that require a significant time investment from participants should be timed to avoid the busiest periods for pension providers. There are particular workload challenges during statutory reporting periods," the DWP stated.

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