Aegon comments on the Pension Regulator’s latest defined contribution trust scheme return data

Money jar with pension written on

Kate Smith, Head of Pensions at Aegon comments on the Pension Regulator’s latest defined contribution trust scheme return data 2021-2022: DC trust: scheme return data 2021 to 2022 | The Pensions Regulator

“The latest scheme return data clearly shows the rapidly changing pension landscape. Single employer trust-based scheme consolidation is continuing at a fast pace, with the number of schemes with 12 or more members (non-micro schemes) declining by 12% in the last year. Since 2012, the number of schemes in this category has declined by a massive 63%. Master trusts have been the clear winners in the consolidation battle, now with over 20.7 million members, up from only 270,000 members in 2012, and with over £78.8 billion in assets. This trend is set to continue, probably at a faster pace as single employer trust-based schemes, with assets under £100 million, now have to test whether their scheme provides value for money for their members. If they fail to prove they provide value for money under the new assessment test, they either have to quickly remedy the situation or wind-up and consolidate into a larger scheme, probably a master trust.

“Master trusts aren’t immune from scheme consolidation either, as the number of authorised master trusts has declined from 38 since authorisation in 2019 to 36. A further decline is expected as the supervision rules bite, regulation becomes more challenging and master trusts look to consolidate.

“Scheme memberships continue to grow, but the side-effect of auto-enrolment and the fluid job market is that deferred memberships have increased by 15% while active membership has decreased by 1% in the last year. The growing number of small frozen pension pots is an issue the pension industry is grappling with, and one that the Government, along with the industry, is trying to address.

“Although scheme assets continue to grow year on year as memberships grow, this has been accompanied by a decline in member’s  average pension assets.  Back in 2012, before auto-enrolment kicked off, the average assets per member was £17,206. Now it’s only £5,212, although there has been a steady  improvement since 2017 when auto-enrolment contributions started to increase. This clearly shows that many employees and their employers are paying contributions at the current 8% minimum contribution levels. There’s obviously more work to be done to encourage people to save more for later life.”

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