Office of Fair Trading
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OFT launches workplace pensions market study

The OFT yesterday launched a market study to examine whether defined contribution workplace pension schemes are set up to deliver the best value for money for savers.

The market for these pensions is going through a period of significant change which will see an expected rise in the value of annual contributions of around £11 billion by 2018.

At present around four million people in the UK are saving into a defined contribution pension scheme. Last October the Government introduced automatic enrolment, an important initiative that requires employers to pay into a workplace pension scheme for all staff unless they opt out. Automatic enrolment is being staged in over the next six years, starting with larger employers last autumn, followed by medium sized then smaller employers, so that by 2018 an additional six to nine million workers will be enrolled in a scheme.

The OFT has decided to take a forward look now to see whether competition will work in the best interests of these savers to deliver low cost, high quality pension schemes. The market study will focus on value for money and the size of pension pot savers end up with at retirement. It will look at the following:

  • How pension providers compete with one another and how the market may develop over time.
  • Whether there is sufficient pressure on pension providers to keep charges low, and the extent to which information about charges is made available to savers.
  • Whether smaller firms face difficulties in making pension decisions in the interests of their employees.
  • Whether smaller firms receive appropriate help and advice in setting up and maintaining workplace pension schemes.
  • Barriers to switching between schemes and a potential lack of ongoing employer engagement in setting up and managing pensions.

Mary Starks, Senior Director in the OFT's Services, Infrastructure and Public Markets Group, said:

'The UK workplace pensions market is set for rapid growth and change over the next six years, in particular with the introduction of automatic enrolment. It is important that these savers get a good deal. We want to take a look at the market now to ensure that providers are competing to offer the best possible deals, and that the choices made by employers mean that employees are saving into good pension schemes for their retirement.' 

The OFT will be working closely with the Department of Work and Pensions, the Pensions Regulator, the Financial Services Authority and others during the course of its study. It will also seek input from other key players including the National Association of Pension Funds, the Association of British Insurers, pension providers, trade bodies and those that represent employers and employees. The OFT plans to complete the study by August 2013.


  1. Further information on the OFT's pensions market study, including the Q&A, is available from the market study page.The OFT will be gathering information over the coming months and would like to hear from interested parties including pension providers, advisors, employers and employee representatives. To get in contact with the team please email
  2. Defined Contribution pension schemes provide pension scheme benefits based on the contributions invested, the returns received on that investment (minus any charges incurred) and the rate at which the final pension fund is annuitised. In contrast, a defined benefit (DB) pension scheme is one that promises to pay out a certain sum each year once you reach retirement age. This is normally based on the number of years a member pays into the scheme and the member's salary either when they leave or retire from the scheme (final salary), or an average of their salary while they were a member (career average). Further information on Defined Contribution pensions is available on the Department for Work and Pensions website
  3. See more information on the Department for Work and Pensions website about automatic enrolment and a glossary of terms (part 4).
  4. OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows the OFT to obtain information and conduct research. Effectively, they allow a market-wide consideration of both competition and consumer issues. They take an overview of regulatory and other economic drivers in the market and consumer and business behaviour. Possible outcomes of market studies include: enforcement action by the OFT, a market investigation reference to the Competition Commission (CC), recommendations for changes in laws and regulations, recommendations to regulators, self-regulatory bodies and others to consider changes to their rules, campaigns to promote consumer education and awareness, or a clean bill of health.

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