The UK pensions market is changing as developments such as auto-enrolment are altering the type and range of services that schemes are seeking from providers, Aon Hewitt has said.

The consultancy firm said that it is currently seeing medium-sized schemes reaching a tipping point, because of a variety of factors, such as financial pressures, increased legislative change, governance concerns and auto-enrolment.

Aon Hewitt partner Russell Agius said that in the past schemes would use the same provider for a limited number of services, which tended to be restricted to defined benefit (DB) schemes.

But now, he added, medium-sized schemes are looking to combine services covering DB and defined contribution (DC) schemes, as well as various risk benefits too, such as insurance broking.

Agius said: "In other words, this major section of the UK pension scheme market is looking to take the integration of multiple pension services much further than has previously been the case.

"Auto-enrolment in particular appears to be a driver for this trend by increasing the focus on DC schemes while DB arrangements become more finance and risk related."

According to data from The Pensions Regulator, membership of DC schemes accounts for 27% of workplace pension memberships in the UK and the Department for Work and Pensions estimated that there will be between five and eight million more pension savers as a result of auto-enrolment.

"DC schemes are therefore starting to take centre-stage as they become the flagship scheme for organisations' current employees. By contrast, DB schemes are increasingly viewed as legacy financial commitments for the scheme sponsors," said Agius.

First published 04.07.2013

monique_simpson@wilmington.co.uk