The ONS have today released Pension Trends Chapter 6 addressing Private Pensions, Pension Trends Chapter 7 focusing on private pension scheme membership, and Pension Trends Chapter 8 which looked at pension contributions.
Pension Trends Chapter 6 revealed:
- In 2011, there were 8.2 million active members of occupational pension schemes. This is the lowest level since the 1950s.
- In 2011, for those who were active members of occupational pension schemes, membership was higher in the public sector (65%) than in the private sector (35%). Most active members of Defined Benefit (DB) pension schemes in 2011 (56%) were in schemes that were closed to new members.
- The proportion of employees who belong to Defined Benefit (DB) occupational pension schemes has fallen from 46% in 1997 to 28% in 2012.
- The average contribution rates for Defined Benefit (DB) occupational pension schemes for both employees (4.9%) and employers (14.2%) were higher than those for Defined Contribution (DC) pensions. For DC schemes, employees and employers contributed an average of 2.8% and 6.6% respectively.
In response to these figures, Scottish Widows warned that the UK is heading for a ‘perfect storm' of rising expectations for retirement yet fewer people saving than ever before. Robert Cochran, Pensions Expert, Scottish Widows, said:
"Today's ONS figures emphasise that as a nation we are entering a perfect storm for pensions. Not only is the number of people in workplace pension schemes at its lowest level in sixty years, but recent research from Scottish Widows found that expectations for income in retirement are still increasing. To meet these aspirations, a 30 year old saver would need to save £12,000 a year, or £1,000 per month every year until retirement. Starting at an older age you would need to pay even more. Whilst starting saving as soon as possible is highly desirable, and increasing contributions as retirement approaches is almost essential, the biggest single difference can come from postponing retirement. The issue is whether a nation that aspires to stop working at 62 and have an annual income of £25,200 can accept this change.
"It is clear that in the coming years we will have to either prioritise saving for the future and prepare accordingly, or seriously adjust our outlook for old age."
Following Chapter 6, Pension Trends Chapter 7 revealed:
- The Annual Survey of Hours and Earnings (ASHE) estimates that, in 2012, 46% of UK employees were active members of a workplace pension, the lowest level since records began in 1997.
- ASHE estimates that active membership of defined benefit pension schemes fell from 46% of employees in 1997 to 28% in 2012.
- The Occupational Pension Schemes Survey estimates that there were 8.2 million active members of occupational pension schemes in 2011, the lowest recorded level since the 1950s. Although membership in the private and public sectors has fluctuated over the period, private sector membership had fallen to 2.9 million in 2011, while public sector membership had been fairly stable for a number of years at just over 5.0 million.
- In 2011, according to the General Lifestyle Survey, 46% of self-employed men had never belonged to a personal pension, the highest percentage since the series began in 1991/92. The percentage of self-employed men that belonged to a personal pension in 2011 was 34%, the lowest percentage since 1991/92.
The last Chapter, Chapter 8 which focused on pension contributions, revealed:
- In 2011, according to results from the Occupational Pension Schemes Survey (OPSS), the average employee in a private sector Defined Benefit (DB) scheme contributed 4.9% of salary.
- For Defined Contribution (DC) schemes, the average employee contribution rate was 2.8%. The average contribution rate for members in private sector DB schemes, having increased from 2000 to 2009, fell in 2010 and fell again, by slightly more, in 2011. For DC schemes; there has been little change in member contribution rates.
- Between 2011 and 2012, many public sector pension schemes made changes to their employee contribution rates as a result of recommendations outlined in the 2011 report of the Independent Public Service Pensions Commission. In 2011, 11% of employees were paying contribution rates of ‘7% and over'. In 2012, this had increased to 37% paying ‘7% and over'.
- The total number of individuals making contributions to personal pensions (group and individual) in 2010/11 was estimated by HMRC to be 5.7 million. There were fewer people contributing than in previous years but the average contribution per person was higher (£3,260 in 2010/11). Employer contributions have seen increases in most years, reaching a UK total of £9.1 billion in 2011/12 compared with £0.5 billion in 1990/91. Individuals' contributions rose from £1.5 billion in 1990/91 to £10.2 billion in 2007/08, but then fell during the recession to £7.7 billion in 2010/11. By 2011/12 they had recovered to reach £8.8 billion.
- The workplace pension reforms introduced in the Pensions Act 2008 started to be implemented with effect from October 2012 and are being phased in over the period to 2018. These reforms include the introduction of minimum contribution rates. The analysis published in this release relates to data collected prior to October 2012, before the reforms took effect.
Stephen Lowe, director at retirement income specialist Just Retirement said: “Today’s figures show us that people are still contributing far too little of their salary to pension savings, and often we are seeing that those who do save are not getting the best deal when it comes to turning savings into income. Government schemes like Auto-Enrolment should help improve savings, and the ABI mandatory Code of Conduct on retirement choices goes some way to ensuring the insurance industry does its part, but people will benefit from professional financial advice which considers how best to organise and decumulate pension and housing assets to meet the challenges faced in later life.”
Please click below to read the entire reports published by the ONS
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