The number of people paying into a defined contribution (DC) pension scheme outnumbers those contributing to a defined benefit (DB) scheme for the first time, The Pensions Regulator (TPR) says.
Automatic-enrolment (AE) has seen DC scheme membership top 14.8 million compared to 11.7 million in DB schemes.
This means that 55% of all private sector pension scheme savers and 85% of active members participate in a DC scheme. Overall membership has increased by 42% since July 2016, and by more than 300% since 2009, TPR claimed.
TPR executive director for regulatory policy Andrew Warwick-Thompson said the findings meant a significant point in UK private sector pension provision has been passed.
“This transformation is the direct result of the success of automatic enrolment which has seen more than 7 million workers join a pension scheme for the first time,” he added.
“Master trusts have played a major role in the success of AE and so the introduction of a mandatory authorisation and supervision regime via the Pension Schemes Bill is vital,” Warwick-Thompson continued. “We need to ensure a level playing field for the protection of consumers investing in contract-based and trust-based multi-employer pension plans, and it is clear that market forces alone would not have achieved this outcome.”
There are 34,500 DC schemes in the UK, which is 2% lower than a year ago. Around 32,000 of these schemes have up to 11 members, while the number with 12 or more members fell by 8% in the past year.
TPR is concerned at the fragmentation of DC provision and the persistence of a tail of sub-scale schemes. “In our opinion, these pose an unacceptable risk to consumer protection,” Warwick-Thompson said. “The consolidation trend we have observed and welcomed in previous years has slowed.”
He added: “We strongly believe that it is unacceptable to have two classes of DC pension saver – those that benefit from the premium of scale and good governance and administration, and those that do not.”
The upcoming launch of the implementation phase of TPR’s 21st Century Trustee initiative will work to raise standards of trusteeship and take regulatory action against trustees who persistently fail to meet minimum competence levels.
Other ways the regulator will be tackling this issue include establishing a new authorisation and supervision regime for master trusts and supporting the government’s call for ways to remove the barriers to consolidation in the DC market.
