The number of pension schemes with more than 5,000 members has remained static for the past year, according to the latest figures released by The Pensions Regulator, suggesting consolidation across the DC auto-enrolment market is slowing.
The figures provide a wealth of data on the AE landscape, which shows that the number of people joining a workplace pension continues to rise. However while the number of larger schemes remains broadly static, the TPR data shows that at the smaller end of the market, master trusts now account for over 90 per cent non-micro membership and 78 per cent of assets.
Overall the TPR figures show that in 2023 there were 340 schemes used for AE purposes, a 42 per cent increase on the 240 used for AE in 2016.
The fact that more people now save into workplace pension, and many have multiple pots, starting a new scheme each time they switch jobs, means that the average pot size has plummeted. TPR’s figures show average assets per membership have fallen by 66 per cent since the beginning of 2012.
At the start of this year the average value of a DC pot stood at £5,846 – significantly lower than the average £17,206 recorded in 2012.
This does not necessarily mean people are saving less overall though. This is a reflection that 12m more people have started saving, often on far lower salaries when compared to the previous DC regime.
Many also have multiple pension pots — and these figures relate to the size of average pot, not the total savings per person.
However concerns have been expressed that this figure could also reflect the fact that some employers are now less generous, and making just the AE minimums.
Commenting on this data, Hargreaves Lansdown head of retirement analysis Helen Morrissey says: “The DC pension landscape is booming in many respects – except one. Pension scheme membership has soared, but when we look at how much is actually in them, average values have collapsed.
She adds: “There are several reasons for this drop – the first is that the huge surge in memberships of pension schemes will have dragged down average values. Many of these members will be new to pension saving, and over time these values will grow. It’s also the case that members are likely to have more than one pension and if you add up their total pension wealth then it will be higher.
“However, there’s also the risk that when expanding their pension schemes to more people, employers have made them decidedly less generous, so fewer people have nothing, but more of those who are saving aren’t doing enough to secure a decent retirement income.”
Morrissey says these figures underling the importance of policymakers assessing current AE contribution levels to make sure they are adequate, in order to to help people build a resilient retirement income.
“The Auto-enrolment Extension Bill reforms would have a big impact here by enabling people to start their pension saving journey earlier and it is disappointing that these reforms could be delayed until later this decade.”
She adds: “Other reforms could include looking at how employers could be incentivised to contribute more to their employee’s pensions – for instance boosting the contributions of those employees who are willing to put in more themselves.”
She says while auto-enrolment has proved successful it is clear more needs to be done. Morrissey also pointed towards recent findings from the HL Savings and Resilience Barometer which indicated that only 39 per cent of households are on track for a moderate retirement.
