Statistical bulletin: 2012 Annual Survey of Hours and Earnings: Summary of Pension Results

Key points:

• In 2012, membership of workplace pension schemes dropped to 46%, its lowest level since 1997.
• 83% of public sector employees and 32% of private sector employees had a workplace pension scheme in 2012.
• The proportion of employees with defined benefit occupational pensions continued to fall. In 2012, 28% of employees had this type of pension, compared with 46% in 1997.
• A higher proportion of employees in the public sector contributed 7% or more of their pensionable earnings, compared to 2011. In 2012, this accounted for 37% of employees, compared to just 11% in 2011.

Background

ASHE is a key source of information on workplace pensions in the UK as it collects information on all types of workplace pension: occupational pension schemes, group personal pensions and group stakeholder pensions. The survey results are used widely in order to analyse pension participation and to monitor the impacts of pension reforms.

ASHE collects information on employee membership of the current employer’s workplace pension scheme. This does not include preserved rights in any former employer’s pension scheme or pensions paid by former employers.

ASHE collects information from employers on employee jobs, although they are referred to in this bulletin as ‘employees’.

Workplace pension scheme membership

Figure 1 shows pension participation by type of pension between 1997, when the Annual Survey of Hours and Earnings (ASHE) first collected the information, and 2012¹.  In 2012, the proportion of employees² who belonged to a workplace pension was 46%. In 1997, 55% of employees belonged to a workplace pension scheme.

Although membership was 46% overall in 2012, there was a significant difference between sectors: 

• 83% of public sector employees were members of a workplace pension scheme;

• 32% of private sector employees were members of a workplace pension scheme.

The fall in the proportion of employees with a workplace pension between 1997 and 2012 has been driven mainly by the fall in membership of defined benefit occupational pension schemes, from 46% to 28%. Membership of defined contribution occupational pension schemes also fell slightly, from 9% to 7% over the same period. Membership of group personal and group stakeholder pensions was 10% in 2012, compared with 1% in 1997 (before stakeholder pensions were introduced).

 

Figure 1: Proportion of employees with workplace pensions: by type of pension, 1997 to 2012, UK

Notes:

1. Results for 2005 onwards are based on a new questionnaire and may not be comparable with earlier results.
2. ASHE estimates for 2011 onwards are based on a Standard Occupational Classification (SOC) 2010 basis.

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Figure 2 shows the proportion of employees with a workplace pension in 2012 by type of pension. Although membership of defined benefit occupational pensions has declined since 1997, this was still the largest category of workplace pension in 2012: 60% of employees with a workplace pension had this type of pension.

Figure 2: Employees with workplace pensions: percentages by type of pension, 2012, UK

Notes:

1. Percentages may not sum to 100 due to rounding.

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However, workplace pension participation differs between the public and private sectors. Table 3 shows that in 2012, 91% of public sector employees with workplace pensions had a defined benefit occupational pension, but in the private sector only 26% of employees with workplace pensions were in a defined benefit scheme. Conversely, defined contribution pensions (whether occupational, group personal or group stakeholder), were more common in the private sector than in the public sector.

Table 3: Employees with workplace pensions: percentages by type of pension, 2012, UK

Table notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions). ‘All employees’ includes employees from the public and private sectors plus employees working for organisations classified as non-profit bodies.
2. Percentages may not sum to 100 due to rounding.

Notes for Workplace pension scheme membership

1. The data was collected in April 2012, prior to implementation of the Workplace Pension Reforms in October 2012, which introduced automatic enrolment for some employers.
2. ASHE collects information from employers on employee jobs, although they are referred to in this bulletin as ‘employees’.

Membership by age, working pattern, gender and earnings

Age is a key factor affecting workplace pension scheme membership. Figure 4 shows the proportion of employees¹ with workplace pensions by age group in 2012²: 

• young employees are less likely to be members of a workplace pension scheme than employees in their forties and fifties;

• membership rates fall in the age bands around State Pension Age because many employees in these age bands are no longer contributing to a pension.

Figure 4: Proportion of employees with workplace pensions: by age band and type of pension, 2012, UK

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Despite the decline in membership of defined benefit schemes and the rise in membership of group personal and group stakeholder pensions over time, the current pattern of membership by age does not show major differences in type of pension between the age bands. This pattern has not changed significantly since 1997.

Nevertheless, there are some differences. For instance, in 2012: 

• 53% of members in the 22 to 29 age band were in defined benefit schemes, compared with 66% in the 55 to 59 age band;

• 25% of members in the 22 to 29 age band were in group personal or group stakeholder pensions, compared with 19% in the 55 to 59 age band.

Workplace pension participation also varies by working pattern (full-time or part-time work), as shown in Figure 5.

Figure 5: Proportion of employees with workplace pensions: by sector, working pattern and gender, 2012, UK

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).

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Figure 5 shows that for full-time employees:

• in the public sector, 90% of male and 88% of female employees had a workplace pension;

• in the private sector the proportion of male employees with a workplace pension was 41%, compared with 35% of female employees.

For part-time employees, the gap between male and female participation is greater, with a higher proportion of women than of men belonging to a workplace pension in both sectors: 

• in the public sector 72% of part-time female employees were members in 2012 compared with 58% of part-time male employees; 

• in the private sector 15% of part-time female employees were members in 2012 compared with 7% of part-time male employees.

Figure 6 shows the proportion of full-time employees with a pension by gross weekly earnings band. There is a strong relationship between earnings and workplace pension scheme membership. This is particularly true in the private sector, where full-time employees with earnings of £600 per week and over are more than five times as likely to be members of a workplace pension scheme as those earning £200 to £300 per week.

Figure 6: Proportion of full-time employees with workplace pensions: by sector and gross weekly earnings band, 2012, UK

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).

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Notes for Membership by age, working pattern, gender and earnings

1. ASHE collects information from employers on employee jobs, although they are referred to in this bulletin as ‘employees’.
2. The data was collected in April 2012, prior to implementation of the Workplace Pension Reforms in October 2012, which introduced automatic enrolment for some employers.

Membership by occupation, size of employer and region

Membership of a workplace pension is also related to the employee’s occupation. Figure 7 shows the proportion of all employees¹ with a workplace pension by occupation in 2012²: 

• those in professional occupations are most likely to have a pension (74% of those in such occupations had a workplace pension in 2012); 

• those in sales and customer service occupations are least likely to have a pension (only 19% of those in such occupations had a workplace pension in 2012).

 

Figure 7: Proportion of employees with workplace pensions: by occupation, 2012, UK

Notes:

1. Occupations as defined by the Standard Occupational Classification (SOC) 2010.

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Figure 8 shows the proportion of employees with a pension by size of employer (measured by number of employees) in 2012. In general, the larger the employer, the higher the proportion of employees with workplace pensions. However, membership rates were slightly lower in the category ‘5,000+’ employees than in the ‘1,000-4,999’ employee size band, particularly in the private sector.

Figure 8: Proportion of employees with workplace pensions: by sector and size of employer, 2012, UK

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).
2. The proportion of public sector employees where employer size is between 1 and 12 employees has been suppressed on quality grounds.

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There is a weak relationship between the region where the employer is located and the proportion of employees with a workplace pension (Figure 9). However, in the private sector there are some differences: 

• membership was highest in the South East (37%); 

• membership was lowest in Wales (29%).

 

Figure 9: Proportion of employees with workplace pensions: by sector and region, 2012, GB

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).

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Notes for Membership by occupation, size of employer and region

1. ASHE collects information from employers on employee jobs, although they are referred to in this bulletin as ‘employees’.
2. The data was collected in April 2012, prior to implementation of the Workplace Pension Reforms in October 2012, which introduced automatic enrolment for some employers.

Contributions to workplace pensions

The Annual Survey of Hours and Earnings (ASHE) also collects information on workplace pension contribution rates. Employee and employer contribution rate bands are shown by sector (Figures 10 and 11) and by pension type (Figures 12 and 13).

Contribution rates by age, occupation, industry and size of company are available in the reference tables published as part of this release, along with results by contracting out status (see Definitions).

Figure 10 shows the proportion of employees¹ in each employee contribution rate band for employees with workplace pensions in the public and private sectors in 2012²:

• 58% of employees in the public sector and 24% in the private sector contributed more than 6% of pensionable earnings;

• in the public sector, 21% of employees contributed between 6% and 7% of pensionable earnings. This compares to 47% in 2011. A higher proportion of employees contributed 7% or more of their pensionable earnings. In 2012, this accounted for 37% of employees, compared to just 11% in 2011; 

• 4% of employees in the public sector and 19% in the private sector did not contribute to their pension (zero contributions).

Figure 10: Employees with workplace pensions: percentages by banded rate of employee contribution and sector, 2012, UK

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).

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Figure 11 shows the proportion of employees in each employer contribution rate band for all employees with workplace pensions in the public and private sectors in 2012:

• nearly half (49%) of employees in the public sector and 12% of those in the private sector received employer contributions between 12% and 15% of employees’ pensionable earnings;

• half of employees in the private sector received employer contributions of less than 8% of employees’ pensionable earnings, compared with 3% in the public sector.

Figure 11: Employees with workplace pensions: percentages by banded rate of employer contribution and sector, 2012, UK

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).

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Figure 12 shows the proportion of employees in each employee contribution rate band for employees with workplace pensions by pension type:

• in 2012, 80% of employees in defined benefit schemes contributed over 5% of their pensionable earnings, compared with 36% of those in defined contribution schemes and 26% of those with group personal and stakeholder pensions;

• compared to 2011, there has been a shift from the 6% to 7% contribution band to the 7% and over band for defined benefit pensions. 38% of employees with these schemes contributed 7% or more of their pensionable earnings in 2012, compared to 14% in 2011. In 2012, 22% of employees contributed 6% to 7% of pensionable earnings, compared to 44% in 2011.

Figure 12: Employees with workplace pensions: percentages by banded rate of employee contribution and pension type, 2012, UK

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).

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Figure 13 shows the proportion of employees in each employer contribution rate band for all employees with workplace pensions by pension type. In 2012:

• 69% of employees with group personal or stakeholder pensions received contributions of less than 8% of their pensionable earnings, compared with 42% of those with defined contribution pensions and 5% of those with defined benefit pensions;

• 45% of employees with defined benefit occupational pension schemes received contributions of 15% or more of their pensionable earnings, compared with 18% of those with defined contribution schemes and 7% of those with group personal or stakeholder pensions. 

Figure 13: Employees with workplace pensions: percentages by banded rate of employer contribution and pension type, 2012, UK

Notes:

1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions).

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Notes for Contributions to workplace pensions

1. ASHE collects information from employers on employee jobs, although they are referred to in this bulletin as ‘employees’.
   
2. Under the Pensions Acts 2008 and 2011, a system was introduced under which employers will have a duty to automatically enrol all eligible employees into a qualifying pension scheme and to make contributions on their behalf. ASHE data for (April) 2012 was collected before the implementation of these reforms from October 2012.  

Definitions

Contracted out: This refers to a statutory arrangement under which pension schemes that meet certain conditions may contract out of the State Second Pension (S2P), formerly the State Earnings-Related Pension Scheme (SERPS). The members’ and employers’ National Insurance contributions are reduced or partially rebated. Members of a contracted out pension scheme obtain rights in the scheme in place of rights to an additional state pension. Contracting out through defined contribution schemes (occupational defined contribution, personal and stakeholder pensions) was abolished from 6 April 2012. Anyone contracted out of a defined contribution scheme at that time will automatically be contracted back into the State Second Pension. Contracting out through an occupational defined benefit scheme continued although this will be affected by proposed changes to the State Pension (see White Paper: The single-tier pension: a simple foundation for saving).

Contributions: Payments into a pension by employees (and other individuals) or by employers.

Defined benefit scheme: An occupational pension scheme in which the rules specify the rate of benefits to be paid. The most common defined benefit scheme is a salary-related scheme in which the benefits are based on the number of years of pensionable service, the accrual rate and either the final salary, the average of selected years’ salaries or the best year’s salary within a specified period before retirement.

Defined contribution scheme: A pension scheme in which the benefits are determined by the contributions paid into the scheme, the investment return on those contributions, and the type of annuity (if any) purchased upon retirement. It is also known as a money purchase scheme. Defined contribution pensions may be occupational, personal or stakeholder pensions.

Group personal pension ( GPP): An arrangement made for the employees of a particular employer or group of employers to participate in a personal pension on a group basis. This is a collecting arrangement only; the contract is between the individual and the pension provider, normally an insurance company. In ASHE, this category also includes Group Self Invested Personal Pensions. GPPs are a form of workplace pension.

Group self-invested personal pension (GSIPP): An arrangement made for the employees of a particular employer, or group of employers, to participate in a personal pension on a group basis. The GSIPP is similar to the group personal pension except that it is the policy holder rather than the pension provider who chooses the investments. GSIPPs are a form of workplace pension. In ASHE, GSIPPs are not collected separately from group personal pensions.

Group stakeholder pension: An arrangement made for the employees of a particular employer or group of employers to participate in a stakeholder pension on a group basis. This is a collecting arrangement only; the contract is between the individual and the pension provider, normally an insurance company. Group stakeholder pensions are a form of workplace pension.

Inter-Departmental Business Register: Introduced in 1994, the Inter-Departmental Business Register (IDBR) is the sampling frame for surveys of businesses carried out by the ONS and by other government departments. It is also a key data source for analysis of business activity.

Occupational pension scheme: An arrangement (other than accident or permanent health insurance) organised by an employer (or on behalf of a group of employers) to provide benefits for employees on their retirement and for their dependants on their death. In the private sector, occupational schemes are trust-based. Occupational pension schemes are a form of workplace pension.

Pension scheme: A legal arrangement offering benefits to members upon retirement. Schemes are provided by employers and are differentiated by a wide range of rules governing membership eligibility, contributions, benefits and taxation. Pension schemes in the private sector have trustees. Personal pensions and stakeholder pensions offered by insurance companies may also be referred to as schemes, but technically they are individual accounts rather than schemes.

Personal pension: An arrangement where the contract to provide contributions in return for retirement benefits is between an individual and an insurance company. Such plans may be taken out by individuals on their own initiative - for example, to provide a primary source of retirement income for the self-employed, or to provide a secondary income to employees who are members of occupational schemes. These would not be covered in the Annual Survey of Hours and Earnings (ASHE) results. Alternatively they may be facilitated by an employer. These pensions are covered by ASHE and include group personal pensions and group stakeholder pensions. Personal pensions are a form of defined contribution pension.

Private sector schemes: Schemes covering the part of the economy consisting of individuals, firms and other institutions. In ASHE the public and private sectors are classified using the legal status from the Inter-Departmental Business Register. ‘All employees’ categories include employees from the public and private sectors plus employees working for organisations classified as non-profit bodies.

Public sector schemes: Schemes covering the part of the economy that is state-provided, including central and local government, schooling, health and social services, policing and the armed forces. In ASHE the public and private sectors are classified using the legal status from the Inter-Departmental Business Register. ‘All employees’ categories include employees from the public and private sectors plus employees working for organisations classified as non-profit bodies.

Stakeholder pension: Available since 2001, a flexible, portable, personal pension arrangement (provided by insurance companies) with capped management charges, that must meet the conditions set out in the Welfare Reform and Pensions Act 1999 and be registered with The Pensions Regulator. They can be taken out by an individual or facilitated by an employer. Stakeholder pensions are a form of defined contribution pension.

Standard Occupational Classification (SOC): The classificatory system used in the UK to place individuals into occupational groups.

Workplace pension: A workplace pension is a pension which is provided or facilitated via a workplace, principally for employees.  It includes both occupational pension schemes and all forms of group personal and group stakeholder pensions.

Background notes

1. Detailed tables on pensions from the 2012 Annual Survey of Hours and Earnings (ASHE) are published.

2. In addition to information on pensions, ASHE also provides information about the levels, distribution and make-up of earnings and hours worked for employees in all industries and occupations. These ASHE results for 2012 are published on the Office for National Statistics (ONS) website.
3. ASHE is based on a 1% sample of employee jobs taken from HM Revenue & Customs (HMRC) PAYE records. Information is obtained from employers and treated confidentially. ASHE does not cover the self-employed nor does it cover employees not paid during the reference period. In 2012 information related to the pay period which included 18 April.
4. In 2012, there was an additional release of ASHE 2011 estimates based on the new occupational classification (SOC2010). This included the pensions results. As the data for this 2012 release (including updated 2011 data) are based on SOC2010, care should be taken making comparisons with earlier years.

5. Methodology and quality information

   Information is available from the Annual Survey of Hours and Earnings Guidance and Methodology section of the ONS website.

6. Relevance to users

   ASHE is a key source of information on workplace pension provision in the UK as it collects information on group personal and group stakeholder pensions as well as occupational pension schemes. The survey results are used widely in order to analyse pension participation and monitor the impacts of pension reforms.

   As ASHE is a survey of employers, it only covers workplace pensions, which are those that are either provided or facilitated by employers; it does not cover individual personal or stakeholder pensions, where individuals enter into a contract with an insurance company that is not facilitated by an employer.

   ASHE only collects information on the current employer’s pension scheme. Employees may hold preserved rights in former employers’ pension scheme or be in receipt of a pension from a former employer. This information would not be captured by the survey.

   In ASHE employees are defined as making contributions to a workplace pension if they have made a contribution, or had a contribution made on their behalf, in the survey pay period.

7. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

   These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

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