More than four in ten (43%) defined contribution schemes are looking to consolidate over the next few years, new research rom XPS Pensions Group has revealed.
Of this amount, three quarters (76%) are looking to opt for a commercial mastertrust.
In its latest report 2022: the year to decide: To Govern or to Consolidate? XPS found that more than half (57%) of the DC schemes surveyed were choosing to continue to govern for the next five years or beyond, with a quarter of those doing so because their current scheme offers appropriate value for money.
A fifth said they are choosing to continue to govern amid concerns that transferring the DC scheme elsewhere would reduce autonomy and the amount of input that the employer would have upon their employees’ financial wellbeing.
However with increased pressure from the Government to consolidate, with the Government believing that bigger DC schemes deliver better member outcomes, XPS warns that maintaining the status quo and continuing to govern will only get harder.
Sophia Singleton, head of defined contribution at XPS Pensions Group, said: “This years’ value for money assessment will be the most important assessment DC schemes will undertake. They need to be prepared for the results and actions that must be taken to ensure compliance, but most importantly, to ensure value for money and good member outcomes.
“Trustees will need to act decisively to ensure DC savers can make the most of their retirement savings.”
The report also found that one third of schemes with assets of £100 million or more expect to consolidate, with most doing so within the next two to five years.
