'Chapter 2: Scheme numbers' of the Occupational Pension Schemes Survey (OPSS) annual report 2011 gives information on the estimated number of occupational pension schemes by sector, status, size, benefit structure, contracting out status and foundation date.
This chapter presents information on numbers of occupational pension schemes in the UK from the Occupational Pension Schemes Survey (OPSS). The chapter refers to private sector schemes only. The survey does not estimate numbers of public sector occupational pension schemes. The numbers of private sector occupational pension schemes are broken down into different categories according to the various features of the schemes.
They include breakdowns by scheme size, status and benefit structure – defined benefit and defined contribution. Definitions of scheme size, status and benefit structure are provided in Chapter 1. The chapter also presents breakdowns by industry type and contracting out status.
An occupational pension scheme’s status can be either open, closed, frozen or winding up (see Chapter 1). Also, schemes can have more than one section (see Chapter 1). A sectionalised or multi-section scheme has two or more distinct groups of members, such as a scheme with a defined contribution section for new entrants and a closed defined benefit section. Sections need not be differentiated by benefit structure - just by some form of barrier preventing members of one section from moving into another.
For the purposes of reporting scheme numbers, a sectionalised scheme is considered open if any section of the scheme is open. All sections of a scheme must be closed for a scheme to be considered closed. (The analysis in other chapters uses the status of the section rather than the scheme as a whole).
Scheme numbers were not published in the annual reports for 2008 and 2009. Figures for scheme numbers have always been weaker than other OPSS estimates as the survey is designed primarily to measure membership numbers. During the 2008 survey an unusual pattern in the figures for scheme numbers, particularly for ‘very small’ schemes (those with 2 to 11 members), was identified. This alerted ONS to the fact that the survey design was not sufficient to produce robust estimates for scheme numbers. As a consequence, it was decided that scheme numbers would not be published until further investigation had taken place. The Methodology Division in ONS undertook a methodology review, and, in May 2011, a paper was published which introduced a new methodology for estimates of scheme numbers.
As a result, scheme numbers were re-introduced into the 2010 report. The review improved the methodology for weighting estimates of scheme numbers, but the problem of sampling variability was not solved by the new methodology. The only way to solve this problem would be to allocate additional resources to the survey so that sample sizes could be increased, particularly for the very small schemes. ONS does not consider this to be a priority in terms of resource allocation at a time of tight budgets. Although the 2011 sample was slightly larger for very small schemes which has, in turn, had an impact on estimates of scheme numbers, the sample size remains smaller than that required to produce reliable estimates for scheme numbers.
In 2011, the estimated total number of private sector occupational pension schemes in the UK was 44,190, a slight increase from 2010 (43,380) and just over three-quarters of the 2007 estimate of 57,010 (Table 2.1).
In 2011, there were estimated to be 22,690 open schemes in the private sector. For the private sector, there were an estimated 12,520 closed schemes in 2011, and some 6,940 frozen schemes and 2,040 winding up schemes (Table 2.2). These estimates have been affected by the issue described in the section: Reliability of scheme numbers estimates.
Table 2.3 shows the distribution of private sector schemes in 2011 by size and status. The majority of schemes – 79 per cent – were very small (2 to 11 members), while large schemes with 5,000 or more members accounted for only 1 per cent of schemes.
|1,000 to 4,999||320||360||200||70||960|
|100 to 999||700||1,090||1,430||500||3,720|
|12 to 99||820||1,180||1,400||560||3,970|
|2 to 11||20,640||9,730||3,820||890||35,080|
Just over half of schemes (51 per cent) were open in 2011. The proportion of open schemes was lowest in the middle size bands: 20 per cent of schemes with 12 to 999 members were open in 2011, compared with 46 per cent of schemes in the 5,000+ band and 59 per cent of very small schemes.
|1,000 to 4,999||250||310||190||70||820|
|100 to 999||620||1,030||1,420||500||3,570|
|12 to 99||820||1,180||1,400||560||3,970|
|2 to 11||20,640||9,730||3,820||890||35,080|
Table 2.4 shows the number of private sector occupational pension schemes with only one section by size and status. In 2011, single section schemes accounted for almost all private sector schemes (99 per cent). However, single section schemes were more common in the smaller size bands than in the larger bands: 55 per cent of private sector schemes in the 5,000+ size band were single section schemes in 2011, compared with 100 per cent of private sector schemes in the bottom two size bands.
The total number of single section schemes can be broken down by the type of benefits offered by the scheme (defined benefit or defined contribution). Hybrid schemes were treated as defined benefit schemes for the purpose of the survey.
Figure 2.5 shows the number of single section private sector schemes by benefit structure and status in 2011. Most of the open private sector schemes with only one section were defined contribution schemes (87 per cent of the total). There were also more closed and frozen defined contribution schemes than defined benefit schemes. The information in Figure 2.5 also allows us to calculate the proportions of single section private sector defined benefit and defined contribution schemes that were open in 2011: these were 31 per cent and 57 per cent respectively.
Table 2.6 shows the number of single section private sector schemes by benefit structure and status in 2010 and 2011. Of the total number of such schemes, 22 per cent were defined benefit and 78 per cent were defined contribution schemes in 2011 (as in 2010). Only 13 per cent of open single section private sector schemes were defined benefit schemes in 2011. The number of open private sector defined benefit schemes with only one section rose from 1,480 in 2010 to 2,930 in 2011. For defined contribution schemes this fell slightly, from 19,900 in 2010 to 19,480 in 2011. These estimates have been affected by the issues described in the Reliability of scheme numbers estimates section.
Table 2.7 illustrates the relative newness of defined contribution schemes compared with defined benefit schemes. The survey asked single section schemes with 100 or more members to state the year in which they were founded. As it is common for schemes to be established following the merger of a number of different schemes, they were also asked to give the earliest year of foundation of any predecessor scheme.
Only 5 per cent of the single section defined contribution schemes in the private sector with 100 or more members that were open in 2011 had been founded before 1980. Private sector defined benefit schemes have a longer history, with over half (54 per cent) of the single section schemes that were open in 2011 founded before 1980. An estimated 13 per cent of private sector defined benefit schemes open in 2011 had been founded since 2000. However, some of these may have been re-opened with a different set of rules following the closure of an earlier scheme.
|Defined benefit||Defined contribution|
|2000 and after||15||13||6||7||39||63||10||..|
Since 1978 and 1988 (for defined benefit and defined contribution schemes respectively), it has been possible for a scheme to allow its active employee members to contract out of the additional component of the state pension, the State Second Pension (S2P), previously known as the State Earnings Related Pension Scheme (SERPS). If an occupational scheme is ‘contracted out’, this refers to a statutory arrangement under which pension schemes that meet certain conditions may contract out of the S2P. Members’ and employers’ National Insurance contributions are reduced or partially rebated.
Members of a contracted out pension scheme obtain rights in the pension scheme in place of additional earnings-related benefits under the state scheme. In 2011, private sector schemes could contract out in one of three ways: salary related (COSRS)1, money purchase (COMPS)2 or mixed benefit (COMBS)3. The ability to contract out of a defined contribution (money purchase) scheme ceased from 6 April 2012.
Table 2.8 shows the number of single section private sector schemes by their size and the route the scheme took to contract out, if it did so. The move away from contracting out has continued. In 2011, 13 per cent of schemes were contracted out.
Although the proportion of single section private sector schemes contracting out remains relatively low overall, this is due to the influence on the total of large numbers of very small schemes, only 4 per cent of which contracted out in 2011. Among larger schemes contracting out remains common, with around two-thirds of schemes with more than 1,000+ members contracted out in 2011. Therefore the picture is different when looking at proportions in the private sector contracting out by active membership (see Chapter 3).
|COSRS||COMBS||COMPS||Total contracted out||Total not contracted out|
|1,000 to 4,999||450||40||50||540||280|
|100 to 999||1600||80||180||1,880||1,690|
|12 to 99||..||..||370||1,470||2,500|
|2 to 11||..||..||1,310||1,490||33,410|
A contracted out salary related scheme (COSRS) is an occupational pension scheme which has retirement benefits that are based on salary, and which has been contracted out according to Section 9(2) of the Pensions Schemes Act 1993. This route is available to defined benefit schemes, provided that the scheme offers benefits of a minimum prescribed standard known as the reference scheme test.
A contracted out money purchase scheme (COMPS) is a scheme which contracts out on a money purchase basis. This route was available to defined contribution schemes from 1988, provided that the reduction in National Insurance contributions was paid into the money purchase account. The reduction in National Insurance contributions is often referred to as the contracting out rebate and the assets derived from the investment of these rebates are known as protected rights. The ability to contract out of a defined contribution (money purchase) scheme ceased from 6 April 2012.
A contracted out mixed benefit scheme (COMBS) is an occupational pension scheme which has separate defined benefit and money purchase sections and which contracts out on both bases. This route was available from 1997 for schemes which wished to contract out some active members’ rights on a COSRS basis and others on a COMPS basis. The ability to contract out of a defined contribution (money purchase) scheme ceased from 6 April 2012.
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