TPR report reveals continued growth of DC pensions

Occupational defined contribution (DC) trust-based pension scheme membership and assets continued to increase in 2021, The Pensions Regulator (TPR) has revealed, as the market consolidated further.

The regulator’s DC trust: scheme return data 2021 to 2022 report showed that asset values of schemes with more than 11 members (non-micro schemes), excluding hybrid schemes, increased by 30 per cent to £113.5bn in 2021.

This represents an increase of 413 per cent since the beginning of 2012, the year auto-enrolment was introduced.

Average assets per member increased by 20 per cent, compared to a 10 per cent increase in 2020, although average assets per member had fallen by 70 per cent since the beginning of 2012.

Average member assets at retirement had declined by 3 per cent during 2021 and by 73 per cent since the beginning of 2015.

Transfers into non-micro DC schemes rose by 134 per cent to £8.6bn, while contributions rose by 4 per cent in 2021, compared to a 41 per cent increase the year before.

Almost two-thirds (65 per cent) of all private sector workplace pension members, including active deferred and pensioner members, are in a micro or non-micro DC scheme, excluding hybrid schemes, while 85 per cent of active members are in occupational DC schemes.

Memberships of non-micro schemes rose by 8 per cent in 2021 and has increased from 270,000 at the beginning of 2012 to 20.5 million at the end of 2021.

However, active memberships decreased by 1 per cent, while deferred memberships increased by 15 per cent.

Nearly all (96 per cent) memberships in non-micro schemes were invested in the scheme’s default investment strategy.

Consolidation of the market continued in 2021, with the total number of micro and non-micro schemes falling by 2 per cent.

Meanwhile, the total number of non-micro schemes, including hybrid schemes, declined by 12 per cent to 1,370.

Since the beginning of 2012, the number of non-micro schemes, including hybrid schemes, has fallen by 63 per cent.

There was a total of 27,700 schemes at the end of 2021, of which 81 per cent identified themselves as a relevant small scheme (RSS) or an executive pension plan (EPP).

As of 31 December 2021, there were 36 authorised master trusts with 8.93 million active members and £78.8bn in assets.

The number of schemes, excluding hybrid, that were being used for auto-enrolment purposes fell from 590 schemes in 2020 to 570 in 2021.

Nearly all memberships (98 per cent) were in schemes being used for auto-enrolment, according to TPR.

“This continuing trend of consolidation in the DC market is good news for savers," commented TPR executive director of policy, analysis and advice, David Fairs.

“The vast majority of DC members continue to be saving into larger, more stable master trusts which, thanks to our authorisation programme, have demonstrated they meet the high standards of governance savers deserve.

“However, every saver deserves to be in a well-run scheme which offers good value for money. We know many small DC schemes are poorly run and we are determined to continue to work with industry to drive up standards of governance and trusteeship.

"We expect this trend of DC consolidation to continue as small schemes are now required to demonstrate that they provide value for members. Where they don’t, we expect them to either wind up or take immediate action to make improvements.”

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