Active membership of defined contribution (DC) pension schemes outnumbers that of defined benefit (DB) schemes for the first time, according to research by the National Association of Pensions Funds (NAPF).
The trade body’s 40th Annual survey, which questioned 250 NAPF fund members, representing 840 pension schemes throughout the UK, found that on average trust-based DC schemes had 15,000 active members compared with just 4,500 active DB members.
Respondents with trust-based and contract-based DC schemes reported 2.5 million members and £42 billion in assets.
Some 2.3 million of these scheme members were active members, more than double the 1.1 million active DB scheme members.
However, the survey found that the average contribution rate continued its slow downward trend to 11.7%, compared with 12.5% in 2013. This consisted, on average, of 7.6% coming from employers and 4.1% from employees.
More than two-thirds (67%) of respondents said that their schemes operate on a matching contribution basi, a third (33%) of respondents receive the minimum employer contribution and 43% of respondents receive the maximum.
The research also found:
- 78% of respondents said scheme members pay an annual management charge (AMC).
- The average AMC is 0.40% across all DC schemes.
- 72% of respondents pay for services such as fees to external advisers.
- 56% of respondents pay fees for administration.
- 53% of respondents pay for governance and training.
- 45% of respondents appoint an annuity broker while 40% of schemes provide guidance.
Graham Vidler, director of external affairs at the NAPF, said: “This year’s survey allows us to take stock of the major changes that we’ve seen in UK workplace pensions in the last 40 years. The obvious trend is the move from defined benefit to defined contribution.
“The decline of defined benefit has been well documented as schemes have gradually closed to new members and new contributions from existing members. This year’s survey shows that trend continuing with 39% of DB schemes fully closed compared to 34% last year.
“That said, DB schemes are still very much the dominant investment force in UK workplace pensions, with our survey showing that on average £2.3bn of assets in private sector DB pension schemes and £0.25bn in DC pensions schemes in 2014. But the number of active members in DB and DC is a very different story.
“For the first time, active membership of DC schemes now outstrips the active membership of private sector DB schemes. On average, trust-based DC schemes who responded to our survey had 15,000 active members, compared to just 4,500 active members in the average DB scheme.
“This shift is not altogether unexpected as most NAPF members have embraced automatic enrolment. It does, however, underline the rapid growth in the number of savers into workplace pensions that automatic enrolment has generated. We expect to see a further major shift in this area in our 2015 survey results.”