The Occupational Pension Schemes Survey (OPSS) is an annual survey of occupational pension schemes, and is run by the Office for National Statistics (ONS). The survey was first run in 1953, then in 1956 and 1963, and then every four to five years until 2004 when it became an annual survey. Until its transfer to ONS in 2006, OPSS was run by the Government Actuary’s Department (GAD).
OPSS collects information from occupational pension schemes about scheme membership, benefits and contributions; it includes sections on very small schemes (schemes with 2 to 11 members) and those that are winding up. OPSS covers both private and public sector occupational pension schemes registered in the UK. Results from OPSS provide a detailed view of the nature of occupational pension provision in the UK.
It is important to note that OPSS does not cover other workplace pensions such as group personal pensions or group stakeholder pensions, which are based on individuals entering into a contract with a pension provider; nor does it cover state pensions.
These statistics are particularly useful because, although the UK has a well-established private pension system, there are concerns about funding retirement benefits for an ageing population (see Pension Trends Chapter 2). The Pensions Act 2008, with some amendments in the Pensions Act 2011, put in place a framework for workplace pension reform designed to increase saving for retirement.
Starting in October 2012, with gradual roll-out to all employers by 2018, employers have a duty to automatically enrol all eligible employees into a qualifying pension scheme and to make contributions on their behalf. Workers will be able to opt out of their employer’s scheme if they choose not to participate but, if they are still eligible, they will be re-enrolled after a three year period.
The reference date for the OPSS is 6 April of a given year; as such the process of auto-enrolment does not have a direct impact on the survey results for 2012.
This release provides summary data on membership of schemes and contributions paid. To assist users in their understanding of these data, a glossary of pension definitions are included as part of the background notes of this release.
We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would also be particularly interested in knowing how you make use of these data to inform your work. Please contact us via email: Opss@ons.gsi.gov.uk or telephone David Matthews on +44 (0)1633 456756.
Total membership of occupational pension schemes consists of:
Active members (current employees who would normally contribute),
Members receiving pension payments (pensioner members) and
Members with preserved pension entitlements (members who are no longer actively contributing into the scheme but have accrued rights that will come into payment at normal pension age).
In 2012 total membership (of schemes with two or more members) was estimated to be 27.6 million compared to 22.2 million in 1991. After a peak of 28.1 million members in 2004 total membership has remained broadly flat at around 27 million.
Membership is evenly distributed over all three membership types:
Pensions in payment, 35% and
Preserved pension entitlements, 37%.
It is important to note that individuals may have more than one of these types of membership. For example, an individual may be in receipt of a pension from a former employer but still working and contributing to a pension. This person would appear in both the pensioner and active member category. As such, all estimates of membership are not counts of individuals.
Total estimated membership in 2012 comprised (Figure 1):
7.8 million active (employee) members.
9.5 million pensions in payment.
10.2 million preserved pension entitlements.
The active members of an occupational pension scheme are those who, under the rules of the scheme, are currently accruing benefits. They are usually current employees of the sponsoring employer. Estimates of active members can be broken down by the sector that they are in, the structure of the benefit, or the status of the scheme.
Since 1991 there has been a slow, but steady, decline in active membership. In 2012, there were an estimated 7.8 million active members of occupational pension schemes. This is compared to 9.0 million in 2008, 12.2 million in 1967 and 6.2 million in 1953. Some of the drop in active membership of occupational pension schemes can be accounted for by the growth in the number of people contributing to group personal pensions. Personal pensions became available from the late 1980s. The Annual Survey of Hours and Earnings pensions release provides information on pension membership for both occupational and contract based pensions. In 2012, around three-quarters of those employees with workplace pensions had occupational pensions.
The decline in active membership has been particularly marked in the private sector. In 2012 there were 2.7 million active members in private sector schemes, compared with 6.5 million in 1991 and 8.1 million at the peak (in 1967).
In the private sector there is a mixture of defined benefit and defined contribution schemes, but in the public sector all occupational pension schemes are defined benefit.
Active membership of public sector schemes has risen over the same period despite the reclassification of some large public sector schemes such as the Post Office and the BBC, to the private sector from 2000. There were an estimated 5.1 million active members in 2012 compared with 4.2 million in 1991 and 3.1 million in 1953 (Figure 2).
The decline in the number of active members in the private sector over the last 20 years reflects the fall in active membership of private sector defined benefit schemes. Active membership of such schemes fell to an estimated 1.7 million in 2012 from 3.0 million in 2006.
Active membership of private sector defined contribution schemes has remained around 1.0 million since 2006 (Figure 3).
An occupational pension scheme may be open, closed, frozen or winding up. An open scheme admits new members. A closed scheme does not admit new members but may continue to receive contributions from or on behalf of existing members who continue to accrue pension rights. In general there are no active members in schemes that are frozen or winding up, as members of such schemes can no longer accrue benefits.
Some schemes have more than one section, offering benefits on different bases to different groups of members. For example, one group of members might be offered benefits on a defined benefit basis, while a second group might be offered benefits on a defined contribution basis. Alternatively, schemes might have different sections in order to offer different levels of the same type of benefit to different members or simply to account for the benefits and contributions of different groups of members separately.
Active membership of open private sector defined benefit scheme sections fell to 0.6 million in 2012 from 1.4 million in 2006 while active membership of open private sector defined contribution scheme sections, has remained at approximately 0.9 million over the same period.
In private sector defined benefit scheme sections only 35% of members were in sections of schemes that were open to new members (‘open schemes’) compared with 91% of members in open private sector defined contribution scheme sections (Figure 4).
Pensioner members are those who are in receipt of pension payments. The estimates in this section are of the number of pensions in payment from UK occupational pension schemes, rather than estimates of the total number of pensioners in the country receiving benefits from occupational pension schemes. The estimates do not include annuities purchased by members of defined contribution occupational pension schemes on retirement. They do include pensions in payment to dependents and pension credit members and also to those who are still working for the same employer.
Between 2006 and 2012, the total number of occupational pensions in payment rose from 8.2 million to 9.5 million.
There was a steady increase in the total number of occupational pensions in payment between 1953 and 2004, from 0.9 million to 9.0 million. However, the number of occupational pensions in payment fell to 8.2 million in 2006, reflecting a fall in the number of private sector pensions in payment, from a peak of 5.6 million in 2004 to 4.6 million in 2006. In 2012 there were 5.2 million private sector pensions in payment (Figure 5).
When active employee members leave the employment of the scheme’s sponsoring employer, they usually have a choice of what to do with the benefits accrued in the scheme. The default position for members with more than two years’ service is a preserved pension entitlement, where the rights remain in the scheme and a pension comes into payment at normal pension age. These estimates do not represent the number of individuals with preserved pension entitlements but show the number of preserved pensions. The estimates also include dependents and pension credit members who have a preserved pension entitlement and those still working for the employer (this may occur when an employer stops pension provision or provision on a particular basis).
The total number of preserved pension entitlements rose to 10.2 million in 2012, from 9.8 million in 2011 (Figure 6). The number of members with preserved pension entitlements has risen faster in the public sector than in the private sector. The public sector number tripled to 3.7 million in 2012 from 1.2 million in 1991 (a 206% increase). Whereas the private sector number doubled to 6.5 million in 2012 from 3.3 million in 1991 (a 98% increase).
Contribution rate questions are only asked of those in the private sector. Information on rates in the public sector are available from the Annual Survey of Hours and Earnings (ASHE) and from published individual scheme resource accounts.
Most member and employer contributions are made as a percentage of salary, excluding bonuses. However, fixed amount payments can be made as part of the schedule of normal (or regular) contributions. On the other hand, when schemes make ‘special’ cash payments, for instance as part of deficit reduction, these payments are not considered normal contributions and information on such payments are not collected by the survey.
Private sector defined benefit schemes had higher contribution rates than defined contribution schemes in 2012 (Figure 7), as in previous years:
For defined benefit schemes, the average contribution rate was 4.9% for members (employees) and 15.2% for employers.
For defined contribution schemes, the average contribution rate was 3.1% for members (employees) and 6.6% for employers.
For career average schemes, the average contribution rate was 5.6% for members (employees) and 12.0% for employers.
In private sector ‘career average’ schemes, revaluing in line with prices, average employer contribution rates were lower (at 12.0%) than for defined benefit schemes as a whole. Average member contribution rates in such career average schemes were higher (5.6%).
Part of the difference between defined benefit and defined contribution schemes’ contribution rates relates to differences in contracting out status. Contracting out 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). As a consequence, the members’ and National Insurance contributions are reduced or partially rebated. Members of a contracted out pension scheme obtain rights in the pension scheme in place of rights to an additional state pension. From April 2012, the ability to contract out only applies to defined benefit schemes.
ONS conducts the Occupational Pension Schemes Survey from a sample of occupational pension schemes registered in the UK in both the public and private sectors. The survey presents a range of statistics, including membership of occupational pension schemes, contributions made by employees and employers and benefits provided by schemes. Estimates of membership include breakdowns by type of member and type of scheme.
The survey does not cover personal pensions, where individuals enter into a contract with a pension provider (usually an insurance company). This exclusion extends to group personal pensions (GPPs) and stakeholder pensions.
The schemes in the survey are selected at random within membership size bands from the pension schemes register – a list of all occupational pension schemes in the UK with two or more members that is maintained by the Pensions Regulator.
The estimates for occupational pension schemes as a whole are produced on the basis of sample numbers. This is done by ‘rating-up’ the data from responses, by reference to a sampling fraction and response rate, with different size bands rated up individually.
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Workplace Pension Reforms
The Pensions Act 2008, with further amendments in the Pensions Act 2011, laid the foundations for a fundamental reform of workplace pensions, requiring every employer to automatically enrol all eligible workers into a qualifying pension scheme, and to contribute to their pensions. The changes were staged in from October 2012, starting with the largest employers. Employees are given the right to opt out of the scheme. Minimum levels for employer and employee contributions will be phased in, rising to a minimum total contribution of 8% of a band of earnings by October 2018.
An eligible worker is:
Someone who is not already in a qualifying pension scheme
Aged 22 or over
Under state pension age
Earns more than £9,440 a year (in 2013/14) and
Works (or usually works) in the UK
Pension Trends Chapter 6: Private pensions gives further information on the workplace pension reforms
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.
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.
Private sector schemes: Schemes covering the part of the economy consisting of individuals, firms and other institutions. The private sector includes state-owned enterprises and other public corporations with outputs paid for by individuals directly rather than through taxation. The pension schemes of the Lloyds Banking Group, the Royal Bank of Scotland Group and HBOS plc are classified as belonging to the private sector.
Defined benefit: A pension in which the rules of the scheme specify the rate of benefits to be paid. Examples include 'final salary' and career average schemes. In a final salary scheme, benefits are based on the number of years of pensionable service, the accrual rate, and the salary in the final year or years prior to retirement.
Defined contribution: A pension in which the benefits are determined by the contributions paid, the investment return on those contributions (less charges), and the type of annuity purchased upon retirement. It is also known as a money purchase pension.
Career average scheme: Career Average Revalued Earnings (CARE) or ‘career average’ schemes are a form of defined benefit scheme which use average earnings over the whole career rather than final earnings to calculate the pension. Pension entitlements earned each year are revalued (increased) during the member’s working life in line with prices or earnings.
Scheme status: An occupational pension scheme may be open, closed, frozen or winding up. An open scheme admits new members. A closed scheme does not admit new members but may continue to receive contributions from or on behalf of existing members who continue to accrue pension rights. In a frozen or ‘paid up’ scheme, benefits continue to be payable to existing members but no new members are admitted, and no further benefits accrue to existing members. Members can make no more contributions but further employer contributions may be made, and may have to be made, for example to correct a deficit. A scheme that is winding up is in the process of termination, either by buying annuities for the beneficiaries or by transferring assets and liabilities to another scheme or to the Pension Protection Fund.
Member: A member is a person who has been admitted to membership of a pension scheme and is entitled to benefits under the scheme, whether now or in the future. Active members are current employees who would normally contribute to the pension scheme (or have contributions made on their behalf). Pensioner members are members who are receiving pension payments from the scheme, their dependents and pension credit members (former spouses who have gained rights as a result of a pension credit following pension sharing on divorce) . In some cases pensioner members may be in receipt of a pension from the scheme but still be working for the employer. Most members with preserved pension entitlements (‘deferred members’) are former employees who have accrued rights or assets in the scheme that will come into payment at normal pension age but who are no longer actively contributing (or having contributions paid on their behalf) into the scheme. Deferred members also include dependents, pension credit members and those still working for the employer. Individuals may have more than one of the above types of membership. For instance, they may be a member of their current employer’s pension scheme as well as having preserved entitlements in a previous employer’s scheme. Hence, all estimates of membership include an element of double counting and are not counts of individuals.
Contracting 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 National Insurance contributions are reduced or partially rebated. Members of a contracted out pension scheme obtain rights in the pension scheme in place of rights to an additional state pension. From April 2012, the ability to contract out only applies to defined benefit schemes. With the proposed introduction of the flat-rate state pensions, contracting out for defined benefit schemes will also end.
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