DC is an "AuM building machine”
The UK DC workplace pensions industry is forecast to increase five-fold by 2030, from £300bn ($480bn) to £1.4trn, spurred on by regulatory changes such as auto-enrolment and Solvency II as well as structural changes in the pensions market.
“Growth should mainly derive from cumulative contributions and market increases over that period,” the report stated.
JPMorgan cites Standard Life in particular could be a “key beneficiary”. Standard Life could potentially grow its workplace pension AuM from £29bn to £174bn by the end of 2030, representing a compound annual growth rate(CAGR) of around 11%.
Standard Life is one of the largest workplace pension providers and the largest DC pension provider in the UK, with a 10% market share, according to the report.
JPMorgan believes that the potential value of the DC workplace pension opportunity for Standard Life could be around £2.1bn, almost a third (30%) of its current market cap. This does not include any benefit from vertical integration with asset management or the existing corporate pension earnings.
“With its first mover advantage in terms of technology, its scale relative to peers and focus on vertical integration, we believe that it is well placed to grow its market share,” stated the report.
The research noted the case of the Australian Superannuation market, where contributions steadily increased. Compulsory pension saving was first mandated in 1992/3 but compulsory contribution rates have subsequently increased meaning employers must pay 9.5% of the employee’s salary into a super fund.
The Australian superannuation market AuM grew at a CAGR of 11%. However, since auto-enrolment in the UK has an opt-out clause, JPMorgan’s forecast for the UK is less aggressive.
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