Number of large schemes continue to increase as market concentrates
Thursday 28 January 2016
New figures published today by The Pensions Regulator (TPR) show further evidence of market concentration in the largest defined contribution (DC) schemes.
The number of DC schemes with 5,000 or more members has increased by 50% since December 2013. At the same time, the data shows that the majority of DC schemes have now closed to new members.
Executive Director for Regulatory Policy at The Pensions Regulator, Andrew Warwick Thompson said:
“This latest report shows a concentration of memberships in larger schemes. We welcome this trend to larger, scalable DC schemes, noting that 86% - 5.9 million - of savers are now in 120 schemes with 5,000 or more members which is a sharp increase since 2013, when there were 80 such schemes.
“We have also seen an encouraging increase in memberships (90% increase, 2.1 million to 4 million) and assets in multi-employer schemes, such as master trusts, which we believe have the potential to offer better governance, sustainability and value for members.
“The successful roll out of automatic enrolment has had a major impact on the DC landscape, with 2.3 million new members. Significantly, of those savers in schemes being used for automatic enrolment, 76% - 3.9 million - are in master trusts. This poses some risk associated with regulatory arbitrage, with new master trusts being subject to far less regulatory scrutiny than new contract-based providers. We are working closely with the DWP to ensure adequate member protections are in place within master trusts.”
“Whilst welcoming the trend to larger schemes and the closure to new membership of over half of the DC universe, many of which are sub scale and sub standard, we remain concerned about the members of the increasing 'tail' of closed schemes. It will not be a good outcome for the members of these schemes if they are left behind in the wave of market reforms now underway. We will be working with Government to ensure that they do not become forgotten, second class pension savers.”
Latest figures show that scheme return completion rates have fallen for the second year running, down 18% from January 2014 to January 2016.
Mr Warwick-Thompson added: “We are disappointed and concerned that scheme return completion rates have fallen. We expect full co-operation in this area and for trustees of all schemes to meet their legal duties. Where trustees demonstrate that they are not meeting even the basic 'hygiene' duty of completing a scheme return, we will use our enforcement powers.”
With DC schemes now dominating the market (today’s report also shows that nearly half of all members in private sector workplace pension schemes, including contract based pensions, are in DC schemes), TPR is going further to drive up standards of governance and administration across the sector. TPR has published a draft revised DC code of practice setting out the standards expected from trustees and last year opened a debate on the competency and capability of trustees and the structure of trustee boards.
TPR’s seventh annual statistics report on DC occupational pension schemes is based on data covering around 35,000 private pension schemes, as of 31 December 2015.
Some of the other key findings from the report include:
- The total number of DC schemes has reduced by 40% since TPR took ownership of the pensions register.
- The total number of DC schemes with 12 or more members has also reduced by 40%.
- The number of members has again increased significantly, with 2.3 million new members. Of the 6.9 million DC members of occupational schemes around 70% (4.7 million) have joined since automatic enrolment began.
- DC schemes with 12 or more members account for 8% of the total universe of DC trust schemes, but more than 98% of the memberships.
- The vast majority of members (circa 95%) are in schemes being used for automatic enrolment.
- The value of assets (in DC schemes with 12 or more members) has increased more this year than in previous years. The total value of reported assets is now £33.5 billion.
- Total contributions are higher this year than they have been previously, at £3.6 billion, an increase of 32% since last year (in DC schemes with 12 or more members).
- In addition to these contributions a further £860 million has been transferred in from another pension scheme.
- Over £1 billion has been transferred to another workplace pension scheme.
- The information in this report is based on data provided by schemes on returns we issued from July to December 2015 and related to the levy year 2014 - 2015 or earlier. Therefore the figures may not yet reflect all changes in DC memberships (including from automatic enrolment) from October 2012 through to December 2015.
- The scheme return is how we collect information about occupational schemes. DC schemes with 12 or more members complete a scheme return annually and schemes with 2 to 11 members currently complete once every three years. Single member schemes are not required to complete a return.
- This report can be read in conjunction with TPR’s automatic enrolment publications including its monthly declaration of compliance reports, which provide the latest membership information as a result of the reforms.
- TPR is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
Matt Adams 01273 662086