The number of trust-based schemes has more than halved since 2010, but master trust membership has increased by a factor of 40 in five years, according to the Pensions Regulator’s annual DC survey.
The survey, published this week, shows there were 4,560 trust-based DC schemes in 2010, not including micro and SSAS arrangements, but the figure had fallen to 2,180 at the end of 2017. Master trust membership has hit almost 10 million today, up from around 270,000 in 2012.
The regulator says that while there are 81 master trusts registered with TPR, the accurate number is 70 – of which 10 are industry-wide schemes.
Savers put £5.4bn into trust-based defined contribution pension schemes last year, an increase of more than 21 per cent year on year. The total amount transferred in to DC schemes has more than trebled, from £660m in 2016 to over £2bn last year. This includes transfers from DB schemes and also from other DC schemes.
Meanwhile, the total amount transferred out of DC schemes has increased by 34 per cent in the past year, from £1.3bn to £1.7bn.
TPR’s annual DC trust report shows that a total of £48bn is now saved in DC pension schemes.
TPR says 51 per cent of DC schemes use a default investment strategy, a slight increase from last year, with 72 per cent of open schemes using one.
The average asset per membership has declined from £4,700 in 2016 to £3,900 in 2017, as a result of more joiners with low pots.
The research shows 98 per cent of members of DC schemes are invested in the schemes default strategy.
The TPR analysis shows 90 per cent of people currently saving into a private sector pension are doing so into a DC scheme.
Pensions and Lifetime Savings Association senior policy adviser – DC Matthew Burrell says: “The 21 per cent year on year increase in funds going into DC schemes shows that automatic enrolment is changing the way in which the nation saves. It is important to build on this success, and ensure that the upcoming increase in contribution rates is well communicated and does not lead to rising opt out rates.
“The report also demonstrated how integral master trusts have become to pension savings in the UK. The fact that the number of people saving into master trusts has reached 10 million is an indication of how fundamental they have been for the success of automatic enrolment. It also shows how important it is for industry and government to work together in order to ensure that these savers are properly protected by a robust and proportionate regulatory framework.”
The People’s Pension director of policy and market engagement Darren Philp says:
“There are still fundamental issues to address and neither the Government, Regulator or industry can rest on their laurels. Consolidation is happening. The fall in the number of DC schemes being reported by The Pensions Regulator, suggesting a decline in riskier, sub-standard schemes, shows that the Regulator’s approach to raising standards is having an impact.”
Barnett Waddingham partner Mark Futcher says: “It is certainly good news that more people are saving, but there are still fundamental problems in the DC market.
“DC administration is overly complicated and could be so much more efficient if daily pricing was not required until the latter years. This would generate cost savings in administration and also fund management. These are the two parts that need to combine and where efficiency is driven. Operating multi-employer master trusts does not automatically mean you have that efficiency.
“The second main issue is engaging members on how and when they may retire. We need innovation that combines insurance and investment and to ensure people understand that the insurance element is in case they live longer than they expect. Increasing assets in DC will help with this but again, let’s get ahead of the curve and regulate that portion of the market – providers are choosing the products of least resistance at the moment.”
