incompleteUK regulators have only an “incomplete, inconsistent and misleading” picture of the fast-growing market for defined-contribution pensions, even though the government is defaulting millions of new savers into these schemes, according to one of the leading market researchers in the field.

Director of market research firm Spence Johnson, has written to the Pensions Regulator to complain about the lack of consistent data.

He argues that because of the uncertainty, asset management companies are struggling to gauge how worthwhile it is to launch products into the DC market, damaging the chances of product innovation that might benefit savers.

He said: “We have been trying for years to find the most basic numbers in this market, and we are now officially fed up. We would like the Regulator to supply some consistent numbers.”

A spokesman for the Regulator argued, however, that the organisation’s data is “as accurate as we can make it”.

Part of the problem is the UK’s split system of pensions regulation, with trust-based schemes — half the DC market — overseen by the Regulator, and contract-based schemes — the other half — overseen by the Financial Conduct Authority.

He latter states: “The problem of having two sources of data for the DC market – the Regulator and the FCA – remains an unresolved issue and our clients privately express amazement to us that the question ‘How big is the UK DC market?’ still does not have an adequate official response.”

The prompt for Spence to write his strongly-worded letter to the Regulator’s acting chief executive was the publication of another round of DC data in January.

In its headline figures, the Regulator reports £30 billion of assets saved up in defined-contribution schemes “with 12 or more members”, and “excluding hybrid schemes with DC members”.

Although downloading Excel data-tables shows that there are £101 billion of assets saved up in “micro-DC schemes” (those with fewer than 11 members). Spence Johnson calls this a “mind-blowing number” to have left out of the headline figure.

According to Spence’s letter: “As a result a casual reader could easily come away with the conclusion that the total DC market in the UK is almost five times smaller than the actual figure of £128 billion that your [the Regulator’s] data suggests it is.”

The Pensions Regulator’s spokesman said workplace DC schemes that will be used for auto-enrolment are the organisation’s priority. He explained: “As we have previously emphasised, micro schemes are essentially tax-wrappers unlikely to be used for automatic enrolment.”

The spokesman continued: “We are collecting data on assets held in micro schemes. We currently have a partial picture because micro schemes are required to complete the scheme return every three years, rather than annually. A more complete picture will emerge over the next couple of years.”

Another problem, according to Spence, is that the Regulator’s figures completely exclude assets saved up in so-called “hybrid” or “dual” pension schemes where a single board of trustees oversees both a defined-contribution and a defined-benefit (or final-salary) arrangement.

But the Regulator’s spokesman said the organisation was working on collecting more data on hybrid schemes: “We plan to include this in future ‘DC Trust’ publications.”

Spence Johnson has produced three reports so far on the market opportunity for asset managers in the UK’s fast-growing DC pensions market. Each one has contained a different estimate for total market size. In its most recent report, the firm said: “It is very annoying that we have to keep rebasing our market total, but we have to because we keep being given new numbers by the authorities.”

In 2012, for example, Spence Johnson estimated the size of the UK DC market at £276 billion, after clarifying earlier figures supplied by the Office for National Statistics. This figure has since been widely quoted and referenced, including by the Office of Fair Trading in its landmark report into workplace DC pensions in September.

 The OFT said at the time: “It is difficult to gather credible information on overall market size … Spence Johnson, an industry consultant, estimated that total DC workplace pension scheme AUM are worth approximately £276 billion in 2013.”

But by this point Spence Johnson had in fact revised its number down to £214 billion based on new data from the Pensions Regulator. And January’s release threatens a further recalculation.

Spence’s letter says: “This year marks the third occasion we have had to significantly revise our estimates of the size of the DC market as a result of data you and other authorities in the UK have produced. We therefore urge you to take on board our comments to prevent us and other industry commentators from having to change again in future.”

The Regulator’s spokesman said: “We agree with the importance of providing complete and credible figures about the DC pensions landscape, to the extent that this is required to perform our regulatory functions – rather than merely because it is of interest to the financial services industry.”

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