There are now approximately 14.8 million memberships of defined contribution (DC) pension schemes in the private sector, compared with 11.7 million in defined benefit (DB) ones according to The Pensions Regulator.
30 JAN 2017 | CHRIS SEEKINGS
Its annual DC Trust report shows that this is the first time DC membership has surpassed that of DB schemes, and is believed to be due to the implementation of auto-enrolment.
DC schemes often result in less benefits for savers, and with membership now 42% higher than this time last year, and over 300% more than it was in 2009, concerns have been raised over the potential impact of lower incomes.
Aegon head of pensions, Kate Smith, said: "The latest membership numbers show clearly that a key tipping point has been passed and DC schemes are the pensions of the future, certainly in the private sector.
"As private sector DB schemes continue to decline, employers are overwhelmingly choosing DC schemes for auto-enrolment and it's important to note that DB schemes tended to be much more generous than current DC.
"For the time being the majority of those in receipt of a pension will have DB pension, but in time this will change and the lower levels of income could have a big effect on society."
The TPR report shows that there are now 34,500 DC schemes, most of which are 'micro schemes' with between 2 and 11 members, and subject to minimal legislative duties.
The biggest worry to TPR is that 360 of 750 DC schemes being used for auto-enrolment fall into this 'micro scheme' category - effectively creating two types of DC pension cover.
"Our concerns are rising about the fragmentation of DC provision and the persistence of a tail of sub-scale schemes. In our opinion, these pose an unacceptable risk to consumer protection," TPR executive director for regulatory policy, Andrew Warwick-Thompson, said.
"We strongly believe that it is unacceptable to have two classes of DC pension saver - those that benefit from the premium of scale and good governance and administration, and those that do not."
TPR have said they will announce a clear objective to raise standards of trusteeship, and will take regulatory action against those who persist in failing to meet the required level of competence.
"We recognise there are some barriers to consolidation in the DC market, such as the requirement for actuarial certificates, and so we support the government's recent call for evidence on ways of removing these barriers," Warwick-Thompson added.