Govt. data shows the dynamism of Defined Contribution workplace pensions

In the past two weeks, we have had two government reports on the shape of the UK funded pension market. The first – the Office of National Statistics report presents a snapshot of the entire DB/DC market last summer. It properly explains where pension investments are made and informs on new flows. It is a big picture document but does not give quite the granularity we get from the second report

The second is the  Pension Regulator’s annual report on defined contribution (DC) schemes, published yesterday,  which revealed there were a total of 28,360 schemes. Of these, 26,720 were so called micro schemes with fewer than 12 members, 84% of which were relevant small scheme or an executive pension plan.

The total number of micro and non-micro schemes had declined by 3% over the 12 months to 31 December 2020.  But the regulator’s data found the total number of larger non-micro and hybrid schemes had declined faster, dropping by 10% during the course of last year. It added that, since the beginning of 2010, the number of non-micro and hybrid schemes had now declined by two-thirds, from 4,560 to 1,560.

This is despite there being an 812% increase in the number of DC scheme memberships over the same period.

Schemes in decline, membership on the incline!

Occupational DC schemes by membership size group 2010-2021

Note: The above chart excludes micro schemes but includes hybrid DC arrangements
 The Pensions Regulator


Memberships of occupational DC schemes by membership size group 2010-2021

Note: The above chart excludes micro schemes but includes hybrid DC arrangements
 The Pensions Regulator

At the same time, TPR noted that the 38 authorised master trusts now accounted for 18.8 million DC memberships, a total of 8.9 million of which were active, and over £52.7bn in assets – up from £38.5bn last year.

Making sense of this.

TPR has published two tables that explain with greater granulatiry what is going on

Table  0ne shows that there are now less than 400 pension schemes with DC membership of more than 1000. Only 140 are of any size at all and as only 38 of these are multi-employer, we can conclude that there are only around 100 single employer DC schemes in the UK with membership over 5000. This is a tiny and shrinking market by scheme size.

Table 2 (below)telling us that there is extreme concentration of membership in these larger schemes, which now account for 21m of us savers. The rest of occupational pension schemes – including all the micros – only accounts for a further 720,000 members.


To properly understand the scale of change, we need to understand the massive shift in the past  11 years from the company pension scheme to the workplace pension scheme where employers participate in master trusts run on a commercial basis.

Not quite the whole story – are workplace GPPs in decline?

Quite a large number of people saving in the workplace using group personal pensions organized by insurance and non-insured SIPP providers. We look to the FCA and ABI to provide us with a better understanding of the dynamics of this market.

However TPR are able to tell us that there are around 1500 open contract GPPs with around 5.6m of us actively saving into them.

None of the membership statistics above or the financial information below, takes into account this substantial part of the market. The ONS report also excludes personal pension data- even when the personal pensions are part of what the FCA calls “employer schemes”.

My impression is that membership of these schemes is static or in decline. There is always some attrition resulting from corporate activity (failures, mergers etc). This would normally be compensated for by new schemes being set up and by organic growth. However I do not see many new GPPs being tendered for and I see an increasing number of GPPs closing as employers switch to master trusts.

Financial information – where is the money going?

TPR’s report suggests that member’s pots as well as their future contributions are moving to bigger schemes.

The regulator said that reported asset values across non-micro DC schemes, excluding hybrids, were now £87.5bn, an increase of £16bn or 23% since last year and 295% since the beginning of 2012. This is far-short of what is known to be in DC in the UK (hybrids and GPPs carrying a large amount of workplace wealth) but the increase in assets is as a result of fund growth and new contributions (including consolidation from micros, hybrids and contract based workplace schemes.

The small pot problem

TPR report that average assets per member have increased by 10% over the last year – contrasting against a previous trend of decline, which has been running since 2013. Overall, average assets per member have fallen by 75% since the beginning of 2012 when auto-enrolment was just about to start its rollout. This is not as worrying as it sounds, it speaks to huge numbers of new savers with small pots,

This year, the regulator reported that average assets per membership at retirement was £5,300. This is a 3% decrease since the beginning of last year and 73% decrease since the beginning of 2015. This is worrying, showing how little personal consolidation is going on. Most people are reaching retirement with multiple pots, though we can only guess at the total pension wealth of individuals (best guess £35,000) this would suggest that reaching retirement with 6 or 7 pots is common

The total amount transferred into DC schemes decreased by 8% last year, a drop from £4bn to £3.7bn. This includes transfers from defined benefit schemes and other DC occupational and personal schemes. This may be connected with the tightening of rules by the FCA on transfers but also suggests that attempts by the FCA to get advisers to consider workplace pensions as a place to transfer DB and DC rights too, is not happening

It said contributions increased by 41%, compared to a 55% increase the year before and noted that 96% of memberships were invested in the scheme’s default investment strategy. This suggests that the pandemic, an increase in unemployment and the  furlough have had some relative  impact, but this is still a healthy increase in cashflows.

The chart below shows how almost all asset growth is coming from big schemes. Small schemes are dying on their feet.

Aggregate reported assets in occupational DC schemes by membership size group 2012-2021


Source: The Pensions Regulator

A more complete Picture

The regulator also released statistics on the wider private pension landscape in the UK, showing at a high level the different forms of employer-sponsored provision available in the private sector, and giving an overview of the size of each type of provision.


Source: The Pensions Regulator

What this tells us.

I have read some commentary that suggests that increased burdens on DC trustees to report on their fund’s impact on  climate change will accelerate change. This may be a contributory factor but I think a much larger drive will be the economic consequences of keeping single occupational schemes open. The same may be said of workplace GPPs which are increasingly looking anachronistic.

When employer’s review pension costs, they may well ask whether the cost of providing their own governance is worth it, or whether more can be achieved by using multi-employer master trusts and devoting resulting savings to improving contributions or bolstering the p/l.

This consolidation is a matter for concern for parts of the pension industry including consultants, lawyers, auditors and professional trustees who are increasingly vulnerable to consolidation.

It also tells us that the concentration of wealth in occupational DC pensions is going to be in the diminishing pool of 38 master trusts and  the even faster diminishing pool of large single employer  occupational schemes.

These market dynamics make DC look increasingly accessible to the asset management community who may finally be seeing their opportunity after decades of exclusion. The total hegemony of passive funds in DC looks to be over and this suggests that DC rather than DB – will become the hunting ground for the active fund manager.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , . Bookmark the permalink.

1 Response to Govt. data shows the dynamism of Defined Contribution workplace pensions

  1. John Mather says:

    “ This year, the regulator reported that average assets per membership at retirement…… though we can only guess at the total pension wealth of individuals (best guess £35,000) this would suggest that reaching retirement with 6 or 7 pots is common”

    This will enhance a full State Pension by less than 10%.

    “Best guess” clearly measuring outcomes is not an issue for regulators I wonder how low this average will go if you take out advised cases (6% of the market we are told)… average client has LTA concerns at retirement but that is advised and may have cost implications with a total annual charge closer to 0.95% and an AgeWage score average of 95.

    Would an observation that “guidance” is not working be a reasonable best guess.

    The trend outlined in these reports seems to be advocating the proposition that 100,000 lemmings can’t be wrong.

    You get what you pay for?

Leave a Reply