DC providers added £113bn in 2023, an increase of 25.5 per cent, with Aviva retaining its position as the biggest bundled DC provider, with assets of £110.6bn, up £15bn on the previous year, according to figures from Corporate Adviser Intelligence’s Master Trust & GPP Defaults report 2024.
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Legal & General Investment Management remains the biggest player if unbundled business is included, with £164bn across its DC business, adding £13.9bn of bundled assets in 2023.
Scottish Widows, LGIM, Aegon and Nest all saw significant growth in assets. SEI’s acquisition activity saw it triple its assets compared to the previous year, while Aon more than doubled its assets
The report shows that growth phase default funds rebounded by 13.2 per cent on average, before charges. Annualised returns were 8.53 per cent in the five years to 31.12.23 for this age group
Over five years there is a 54.5 per cent difference in returns delivered to young savers, with National Pension Trust returning 79.7 per cent, while Now: Pensions returned 25.2 per cent, assuming a 0.5 per cent AMC. For investors one day from retirement, returns averaged 8.57 per cent, with at-retirement strategies delivering an average return of 3.96 per cent over the previous five years.
Derisking glide paths range from 6 to 35 years, with strategies on average starting to derisk 13.9 years from state pension age.
The report shows that while many single-employer trusts remain in the UK, the multi-employer DC sector is achieving a significant level of consolidation, with 79 per cent of assets held by seven providers. While direct like-for-like comparisons are difficult, this figure can be seen in the context of the Australian Superannuation sector, where 62.3 per cent of assets are held by eight providers and 81.8 per cent are held by 14 providers.
The report shows that the number of deferred pots across the 20 main multi-employer DC providers surged to more than 27.5 million, with several providers seeing year-on-year percentage increases well into double figures.
Bulk transfer values were more than £2bn higher in 2023 than the previous year, standing at £7.98bn, with Standard Life adding almost £2bn of assets through 13 bulk annuity deals. Aon Master Trust saw £1.2bn of bulk transfers, while LifeSight and Legal & General both saw bulk annuity inflows of around £1bn.
Hargreaves Lansdown (26 per cent) was the provider with the highest proportion of DC savers nominating their death benefit beneficiary, closely followed by Standard Life and Aegon on 24 per cent, Aon on 21 percent, and LGIM, Smart and Mercer on 18, 17 and 15 per cent respectively. Nest is the biggest provider not to disclose what proportion of its members have done so.
Isio is the most widely used investment adviser to master trusts, used by five providers.
Corporate Adviser Intelligence head of research John Greenwood says: “This report shows that the DC pensions sector is gaining real momentum, with growth of more than £110bn in 2023. The report also shows that the UK DC sector is, despite some perceptions to the contrary, more consolidated than its Australian counterpart, if single-employer trusts are left to one side.
“On investment strategy, the report shows there is still a wide range of approaches being taken to asset allocation at all stages in the savings journey.
“When it comes to evidencing member engagement, there are again big differences between providers, a fact that highlights the importance to employers of making the right choice when selecting their pension provider.”
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