Concentration in the defined contribution (DC) pension landscape continued at a similar rate to previous years in 2023, data from The Pensions Regulator (TPR) has revealed, as the number of non-micro DC and hybrid schemes fell by 11 per cent in 2023.

TPR said that the reduction in schemes was solely driven by schemes with fewer than 5,000 memberships, with the number of non-micro schemes and hybrid schemes falling by 70 per cent since 2012 (from 3,660 to 1,080).

However, the regulator found that membership in non-micro schemes increased by 9 per cent over the past year, up from 13 per cent in 2022, and have grown by more than 11 times since the beginning of 2012.

This was part of a broader increase in scheme membership following the introduction of auto-enrolment, as TPR revealed that scheme membership has grown by more than 12 times since the beginning of 2012, rising from 2.3 million to 28.8 million.

Master trusts continued to provide for the majority (84 per cent) of DC of hybrid scheme members though, also accounting for over 90 per cent of non-micro memberships and 78 per cent per cent of assets.

According to the latest data, there were 35 authorised master trusts in 2023, accounting for 26.1 million DC memberships, including hybrid schemes, and over £122.9bn in assets, excluding hybrid schemes.

However, TPR found that there has been little growth (1 per cent) in assets per member in 2023, marking a fall on the annual growth of 10 to 20 per cent in assets per member recorded in the previous three years.

And despite this slight growth, TPR found that average assets per membership have fallen by 66 per cent since the beginning of 2012.

Reflecting on this, TPR acknowledged that investment markets were volatile in 2022, explaining that this impacted scheme returns received in 2023 - resulting in a wide dispersion of returns dependent on the date of scheme submissions.

A spokesperson for TPR said: “A drop in average asset values since 2012 highlights the success of automatic enrolment (AE).

"The AE programme transformed the savings landscape with millions more people now saving into a pension for the first time or saving more. 

"This influx of new savers, combined with the retirement of defined contribution members who had been saving for longer and so built larger pots, initially caused average assets per member to decrease with some years seeing significant falls. 

"However, this trend stabilised and since 2020 average assets per member have risen every year.”  

Adding to this, Hargreaves Lansdown head of retirement analysis, Helen Morrissey, said that there could be a number of factors behind the "massive drop" in asset values, noting in particular, that the "huge surge" in memberships of pension schemes will have dragged down average values.

"Many of these members will be new to pension saving, and over time these values will grow," she added, however. "It’s also the case that members are likely to have more than one pension and if you add up their total pension wealth then it will be higher. "

Morrissey warned, however, that there is also a risk that when expanding their pension schemes to more people, employers have made them decidedly less generous, so fewer people have nothing, but more of those who are saving aren’t doing enough to secure a decent retirement income.

"It does also point to the importance of assessing auto-enrolment contribution levels to make sure they are adequate and able to help people build a resilient retirement income," she continued.

"The Auto-enrolment Extension Bill reforms would have a big impact here by enabling people to start their pension saving journey earlier and it is disappointing that these reforms could be delayed until later this decade.

"Other reforms could include looking at how employers could be incentivised to contribute more to their employee’s pensions – for instance boosting the contributions of those employees who are willing to put in more themselves."

TPR's latest DC update also included some "important" data validation methodology changes, which impacted impact data on scheme status, the number of EPP schemes and the number of schemes used for automatic enrolment.

"We have enhanced our methodology for validating scheme status for occupational DC schemes in 2023 as part of a programme of continuous improvement around digital and data," TPR explained.

"This is to mitigate administrative error and improve the accuracy of the statistics reported in our publication."

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