Number of defined contribution schemes falls by 15%
The UK's defined contribution (DC) pensions market is rapidly shifting toward consolidation, with new figures from The Pensions Regulator (TPR) revealing a significant decrease in the number of pension schemes.
What the report shows
The 2024 DC Landscape report published by The Pensions Regulator (TPR) shows a 15% reduction in the number of DC schemes, now totalling 920. This marks the first time the total has fallen below 1,000 schemes.
The decline primarily affects smaller schemes, particularly those managing fewer than 5,000 memberships. This change aligns with TPR's strategic objective to consolidate smaller schemes into larger, more robust entities that can offer improved governance and greater value for members.
The role of governance
TPR's research underscores the governance challenges faced by smaller pension schemes, highlighting that only 17% of these small schemes completed the required enhanced value-for-members assessments last year.
To address this, TPR launched a regulatory initiative aimed at challenging smaller schemes to either demonstrate improved value or exit the market.
Chief Executive of TPR, Nausicaa Delfas, emphasised the importance of this consolidation, stating:
“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.”
A decrease in scheme memberships
The report also noted a 6% increase in total DC scheme memberships, rising from 28.8 million in 2023 to 30.6 million in 2024. While active memberships remained stable at 11.1 million, deferred memberships surged by 10%, reaching 19.5 million.
Master trusts remain dominant, managing 28 million memberships, representing 91% of all DC and hybrid scheme members, and controlling assets worth £166 billion, 81% of total DC assets.
Additionally, total DC scheme assets grew substantially by 25% year-on-year, from £164 billion in 2023 to £205 billion in 2024. Average assets per member also increased by 17%, reflecting a healthy balance of investment returns and consistent contributions.
For the first time, TPR expanded its reporting to include data on micro and hybrid scheme assets, underscoring its commitment to transparency and improved governance across the pensions sector.
The importance of financial advice
In this rapidly changing pensions landscape, the role of professional financial advice becomes even more critical.
Financial advisers help savers navigate complexities around pension consolidation, ensuring decisions made today enhance future retirement outcomes and maximise the value savers receive from their pensions.
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