Assets in the UK multi-employer provider DC sector shrank by £14bn in 2022, but the sector added more than 1m new active savers, an increase of 6.7 per cent, according to figures from the sixth annual Corporate Adviser Master Trust & GPP Report.
There are now more than 17 million active savers across DC master trust and contract-based providers.
Nest has the most active savers, at 4.8m, followed by Legal & General at 2.18m. An 18 per cent increase in active member numbers from Aviva saw it leapfrog The People’s Pension into third place, with 2.08 million active savers.
The report finds that deferred member numbers are growing at twice the rate of active members – 12.3 per cent versus 6.7 per cent. The People’s Pension has more than twice as many deferred members as active members.
Aviva remains the biggest DC provider in terms of bundled assets, followed by Scottish Widows and Legal & General, which is the biggest DC provider if unbundled assets are included.
Bulk transfers of schemes into master trusts was down 19 per cent, at 112 transfers, compared to the previous year’s 139 transfers. It marks a significant fall from the 192 bulk transfers in 2020.
Legal & General has seen the most bulk transfers into its master trust for the third year in a row, with 28 schemes moving to the provider. It also saw an increase in bulk transfer values, at £2.5bn. Fidelity was the only other provider to record a year-on-year increase in bulk transfer values, transferring in £450m of assets
Hargreaves Lansdown (52.3 per cent) and Royal London (44 per cent) – both contract-based providers – have the highest proportion of members contributing more than their employer’s standard contribution level.
In a difficult year for most asset classes, DC pension defaults performed worse for older savers with supposedly less risky asset allocation strategies than for younger ones. The one-year Corporate Adviser Pensions Average (CAPA) return for savers five years from state pension age was -9.71 per cent in 2022, half a percentage point behind that of younger savers. Those one day from retirement performed marginally better, but were still down -8.05 per cent on average.
Fidelity FutureWise suffered a -14.8 per cent fall in the year to 31.12.22 for the default supporting savers for the asset allocation one day from SPA, compared to -8.7 per cent for its fund for savers 30 years from SPA, the biggest negative gap between at-retirement and growth phase.
The Aon Managed Core Retirement Pathways default delivered the highest return in the five years to 31.12.22, with an annualised 9.1 per cent a year return. This represents a 53.5 per cent cumulative return, compared to 3.6 per cent delivered to savers in the Now: Pensions default, the poorest performer over five years, assuming a typical industry annual charge of 0.5 per cent a year.
Corporate Adviser editor and head of research John Greenwood says: “The defined contribution (DC) pensions sector experienced a very challenging year in 2022, with virtually all providers’ defaults suffering losses for virtually all age cohorts. The violent gyrations in the bond markets mean 2022 will be remembered as the year that glide paths were turned on their head, with older savers, in supposedly less risky strategies, in many cases seeing performance worse than that experienced by their younger, more risk-tolerant counterparts.
It was also a challenging year for industry participants, with consolidation of single-employer trusts into master trusts, a trend seen as a policy priority for government and the regulator, slowing down in 2022. Fewer single-employer trust schemes transferred than in previous years and the overall value of assets transferred also fell.
That slowdown, plus the fall in asset values caused by the economic difficulties flowing from the Russia/ Ukraine conflict and the post-Covid reset, led to asset values held by DC multi-employer providers actually falling, despite inflows from employees and scheme transfers.
But it was not all bad news. A million new active members joined the 24 master trusts and contract-based providers covered
in this report in 2022. Assets under management are expected to continue their longer term upward trajectory and the DC
sector is alive with innovation around engagement, ESG, guidance architecture and at-retirement strategy. And broadening the investment mix to include illiquids is also clearly at the top of the agenda.”
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