TPR

FCA

Here is a press release published by the Pensions Regulator yesterday.

The defined contribution pensions (DC) market continues to radically reshape towards fewer, larger pension schemes according to new data from The Pensions Regulator (TPR).

The official statistical release, the 2024 DC landscape shows the number of DC schemes decreasing 15% in 2024 to 920 – under 1,000 for the first time.

The drop in the number of schemes is primarily driven by those with fewer than 5,000 memberships.

Driving consolidation in savers’ interests was at the heart of TPR’s three-year Corporate Plan released last year with a regulatory initiative launched to challenge small schemes on the value for money they offer savers.

TPR research shows smaller schemes are more likely to have poorer standards of governance – with a TPR survey of small schemes finding that just 17% were undertaking the required enhanced value for members assessment in 2023.

Nausicaa Delfas, Chief Executive of TPR, said:

“Our DC landscape report is further evidence of the evolution towards a pensions market of fewer, larger pension schemes, which we believe are better placed to deliver for savers and drive growth in savers’ interests.

“Value for money should be the guiding principle that runs through the DC system and where schemes cannot compete with the very best, they should consolidate and exit the market.”

The report, published today, also explains the following:

• Members in DC schemes increased 6% from 28.8 million members in 2023 to 30.6 million members in 2024. Active members remained at 11.1 million in 2024, but deferred members increased by 10% from 17.7 million to 19.5 million.
• Master trusts continue to provide for most DC members, holding 28 million memberships (91% of DC and hybrid schemes) and £166 billion in assets (81% of all DC scheme assets).
• DC scheme assets grew 25%, from £164 billion in 2023 to £205 billion in 2024 leading to a stable growth of 17% in assets per member, from £6,000 in 2023 to £7,000 in 2024. This growth in scheme assets was driven by a combination of contributions and investment returns.

Here’s the excellent report that sits behind it.

There is a lot to pick through here and this graph shows that there was nothing special about last year (except rather better reporting!). This is important – on a day when TPR published its aims on data (for the next 5 years) here is evidence that it can do very well.

We are seeing small schemes disappearing and large schemes stabilising, This is before the arrival of Value for Money (suggesting that VFM may be a lot of work to solve a problem that is already almost solved).

The problem is in legacy workplace pension schemes outside the remit of the Pensions Regulator. There are still a number of group personal pensions operating under the auto-enrolment rules (TPR’s) but not included here. These GPPs were popular in the early days of staging and are looked after by the FCA.

Can I suggest that next year, TPR publishes a workplace pension report that includes all funded pensions (excluding only the unfunded schemes offered in the public sector)?

There has to come a time when we consider workplace group personal pensions alongside occupational schemes and ask some serious questions about value for money. If, as I hope we do, we move towards collective solutions in decumulation or wider, the argument for retaining a group personal pension becomes weaker.

Here is the Pension Regulator’s consolidated view not just of DC but of hybrid and pure DB schemes by deferred and active members. The active numbers are of particular interest as they show how (even in DC) they are dwarfed by DC deferred memberships.

Micro schemes are a pain in TPR’s backside, I remember when I started looking at these numbers the 25,000 schemes were over 40,000 but the truth is that there are still far too many micro schemes for the good they are doing. 21,000 of the 25,000 schemes are EPPs and other Relevant Small Schemes. They are of no significance other than to those who are in them, One hopes that they can take care of themselves.

What do we learn?

The Pensions Regulator’s problem with DC pension proliferation is reducing and the stability of large DC schemes (especially master trusts) suggests that there is a hardcore of DC schemes which we can expect to see in ten years.

These large well supported DC schemes are ripe for the Government to set to work. I am looking for action in the Pension Bill that is soon to be published.

We learn that there are less than 1,000 DC occupational schemes that need to be reformed to call themselves “pension” rather than “saving” schemes.

There are a number of workplace GPPs that are of a size to be added to this number. These should not be left behind. We need people to consider themselves being offered a pension whether the scheme is trust or contract based, to the saver, they do the same thing. DC needs reformation and these numbers show that we are in a world where the acceleration of DC consolidation is to be anticipated. Multi-employer master trusts will see to that, the question is whether these schemes will take over the dwindling GPPS by the end of the decade.