UK Defined Contribution Funds Rose 21% in 2017

UK defined contribution (DC) pension plans grew by £5.4 billion ($7.64 billion) to £48 billion in 2017, a 21% increase from the previous year, according to a new report released by The Pensions Regulator (TPR). 

“The success of automatic enrollment has put DC schemes—and particularly master trusts—at the heart of pension saving in the UK, and our figures illustrate this trend,” said Anthony Raymond, head of regulatory policy, analysis, and advice at TPR, in a release. “For these new and existing savers, we have a role to protect their benefits and so we are working hard to drive up standards of trusteeship.”

Raymond said TPR is implementing the Pension Schemes Act 2017, which requires master trusts to meet a clear set of standards in order to obtain authorization to operate.

TPR’s annual DC trust report found that 90% of people currently saving into a private sector pension are doing so through a DC plan. Additionally, memberships are up 29% from the year before to 12.6 million people, and are up by more than 400% since 2010. Master trusts make up a majority of the increase, and account for 10 million DC savers, up from 270,000 at the start of 2012.

The report also found that while membership and total asset value are on the rise, the number of DC plans continues to decline. TPR said that the number of plans, not including micro or self-administered ones, has more than halved since 2010. to 2,180 from 4,560.

“We welcome the continued reduction in numbers of DC schemes,” said Raymond. “We have been concerned about a tail of sub-standard schemes and have been encouraging trustees who cannot or will not meet the standards we expect to consider consolidation.”

Other key findings of the DC trust report include:

• The average asset per membership has declined to £3,900 in 2017 from £4,700 in 2016 due to an increase in the number of first-time pensions savers.

• 51% of plans use a default investment strategy.

• 61% of all private sector workplace pension members are in DC plans.

• 90% of all those currently saving are investing into DC plans.

• The total amount transferred out of DC plans has increased by 34% in the past year to £1.7 billion from £1.3 billion.