Members of DC pensions staying in default funds, says PLSA

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The Pensions and Lifetime Savings Association (PLSA) today published its 43rd Annual Survey, which seeks to provide a snapshot of workplace pension provision in the UK’s largest private and funded public sector schemes.

Key findings outlined in the executive summary include:

  • Defined Contribution (DC) schemes reported that 88% of their main DC active members remain in their default funds. However, as in 2016, choice remains high, with schemes reporting a median number of 14 funds available. Although the number does vary between trust and contract based schemes, with trust based schemes offering on average 12 different funds compared to 55 in contract based schemes;
  • Mean running costs reported by Defined Benefit (DB) schemes increased from £546 (2016) to £612 (2017) with costs driven by increase to levies, governance and trustee training as well as administration, record keeping and communications;
  • For DB schemes, the overall contribution rate rose slightly to 33.6%. This is mainly due to a slightly higher employer contribution rate 28.0% (2017) compared to 24.2% in 2016. The mean employee contribution rate continued to be around 6.0% at 5.6%;
  • The share of DB assets invested in equities continued to fall from 33% (2015) to 28% (2016) to 23% (2017).  The share of assets in fixed income and other assets increased to 47% (45% – 2016) and 30% (28% – 2016) respectively;
  • Just over a third (34%) of DC respondents described their investment strategy for the growth phase of their main scheme’s default fund as passive tracker.  This was followed by multi-asset fund (26%), diversified growth fund (25%) and bespoke solution (21%);

PLSA director of external affairs Graham Vidler, pictured left, said that the report charted the growth of DC schemes as the dominant workplace pension option following the advent of automatic enrolment, and that the report highlighted “the stark difference” between the amount of money flowing into DB schemes compared to DC schemes.

“As part of our commitment to helping everyone achieve a better income in retirement, we launched a major new consultation – Hitting The Target – in October which proposes a set of national retirement income targets. 

“This consultation closes on the 12 January and we welcome input from interested parties as we work to build a retirement savings market which is truly focused on the end users.”