Half of occupational DC trust-based pension schemes use default investment strategy


Just over half (52%) of occupational defined contribution (DC), trust-based pension schemes in the UK use a default investment strategy, according to research by The Pensions Regulator (TPR).

Its DC trust: Presentation of scheme return data 2018-2019 report, now in its ninth edition, provides information from 31,910 current schemes from the pension schemes register, with an effective date of 31 December 2018; 2,010 of these have 12 or more members.

The report states that there are 31,910 occupational schemes with two or more DC members, as well as 74 master trusts that are registered with TPR. Three-fifths (61%) of all private sector workplace pension members, including active, deferred and pensioner members, are in DC schemes; 90% of active members are investing into a DC scheme. Deferred membership has increased by 45% in the last year, compared to a 24% increase in active members.

Membership of master trusts has also increased, from 270,000 in 2012 to 13.4 million in 2019. The majority (99%) of members in DC schemes with 12 or more members are invested in the scheme’s default strategy.

Asset values of schemes featured in the report are £60 billion. The average assets per membership at retirement increased over the past year, from £9,000 to £9,800, while contributions also rose over this time, moving from 21% to 22%. The total amount transferred out of DC schemes to other workplace or personal pensions has increased by 22% in the last year, rising from £1.7 billion to £2.1 billion.

The report shows that 950 schemes are currently being used for auto-enrolment purposes; 98% of members are in schemes being used for this.

David Fairs, executive director of regulatory policy, analysis and advice at TPR, said: “Overall, it is a picture of a growing market, driven by automatic enrolment and a new culture of saving into a workplace pension. Regardless of the trends, our role to make sure savers’ money is protected and pension schemes are offering value for money for their members remains vital.

“These figures are yet another reminder about what is at stake if schemes are not run well: people’s livelihoods, which could be at risk. We continue to encourage trustees, particularly those running smaller schemes which are struggling to meet the standards of governance which we expect, to seriously consider if they are doing the best for their members. Winding up and moving members into a better run scheme, such as an authorised master trust, may in some cases be the better option.”