The Annual Survey of Hours and Earnings, known as 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 latest ASHE collected data relating to April 2013 and is the first ASHE since the introduction of auto-enrolment, a major aspect of workplace reforms designed to increase private pension saving in the UK. Auto-enrolment requires that all eligible employees are to be enrolled into a qualifying workplace pension by their employers. The requirement for auto-enrolment is being introduced in stages and started in October 2012 for employers with over 120,000 employees, with gradual roll-out to all employers by 2018.
We will first focus on workplace pensions and look at the proportion of UK employees who had a workplace pension across the period from 1997 to 2013, as well as the type of pension these employees had. Using this graph, we can see that employee membership of any type of workplace pension fell from 55% in 1997, to 46% in 2012. The fall from 1997 to 2012 was driven by a decline in the proportion of employees with defined benefit schemes, such as final salary pensions, illustrated by the black line. In 1997, 46% of employees were members of an occupational defined benefit pension. In 2012, this percentage has decreased to 28%. Membership of occupational defined contribution pension schemes, illustrated by the blue line, decreased from 9% to 7% over the same period. However, membership of Group personal pensions (GPP’s) and group stakeholder pensions, illustrated by the purple line, increased from 1% to 10% over this period, partially offsetting the decline in occupational defined benefit pension scheme membership. In 2013, the proportion of employees who belonged to a workplace pension increased to 50%, the first increase since 2006. The increase from 2012 to 2013 is driven by increases across all pension types. Occupational defined benefit pension scheme membership increased from 28% in 2012 to 29% in 2013. Membership of Group personal pensions (GPP’s) and group stakeholder pensions increased, from 10% in 2012 to 12% in 2013. Membership of occupational defined contribution pension schemes also increased, from 7% in 2012 to 8% in 2013.
Though membership of all types of workplace pension has increased since 2012, the largest category of workplace pensions in 2013 was still occupational defined benefit pensions: 59% of employees with a workplace pension had this type of pension. Workplace pension participation differs between the public and private sectors. In 2013, 95% of public sector employees with workplace pensions had an occupational defined benefit pension. In the private sector only 24% of employees with workplace pensions were in a defined benefit scheme in 2013. Conversely, defined contribution pensions (whether occupational, group personal or group stakeholder), were more common in the private sector than in the public sector.
We will now look at the relationship between age and workplace pension membership, using this chart. In 2013, Employees aged 22 to 29 are less likely to be members of a workplace pension scheme than employees in all older age bands, except employees aged 65 and over. Those employees in the 16 to 21 age band are less likely to be members of a work place pension scheme than employees aged 65 and over. 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. There are some notable differences in workplace pension membership by age since the introduction of workplace pension reforms: 37% of 22 to 29 year olds were members of workplace pensions in 2013, compared to 31% in 2012. This 6 percentage point increase is larger than for any other age band. This increase is driven by an increase in membership of occupational defined contribution, group personal and group stakeholder schemes, but not occupational defined benefit schemes.
The ASHE also contains data relating to employer contribution rates. This chart will show, for 2013, the proportion of employees in each employer contribution rate band for all employees with workplace pensions, separately for the public and private sectors: As you can see, 92% of employees in the public sector with workplace pensions received employer contributions of 12% and over of their pensionable earnings. In the private sector however, 55% of employees with workplace pensions received employer contributions of less than 8%. Comparison of 2013 ASHE results to 2012 results reveals that: The proportion of employees in the private sector receiving employer contributions of greater than zero and under 4% has increased from 16% in 2012 to 21% in 2013. The proportion of employees in the private sector receiving employer contributions over 8% has decreased from 50% in 2012 to 45% in 2013.