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Chapter 9: Changes to Schemes - OPSS Annual Report, 2011 This product is designated as National Statistics

Released: 19 September 2012 Download PDF

Abstract

'Chapter 9: Changes' of the Occupational Pension Schemes Survey (OPSS) annual report 2011 covers changes to occupational schemes and approach to working beyond retirement age.

Introduction

One major change in recent years is the closure of many private sector defined benefit schemes to new members. However, a change in status is not the only way in which a scheme can change. Other widely reported changes have included increases to the normal pension age, moves towards less generous accrual rates and increases to the minimum age for early retirement.

This chapter presents results on the main changes which have taken place. It also presents analysis of the experience of scheme members who continue to work beyond normal pension age.

Changes

In the 2011 survey, private sector schemes with 12 or more members that were not in the process of winding up were asked whether there had been any changes to the scheme since 6 April 2010 and, if so, which of a list of possible specific changes had been implemented. Table 9.1 shows the main results for defined benefit schemes (in the 2011 column) and compares them with results for previous years.

Table 9.1: Proportion of active members of private sector defined benefit occupational pension schemes: by changes made to the scheme since 6 April of previous year (UK, percentages)

  2009 2010 2011
Increases in rates of contribution from either employees or the employer 36 56 52
Changes to indexation increases offered by the scheme 22 16 33
Reductions in accrual rates 6 9 14
Scheme closed to new entrants (with an alternative offered)  4 6 13
Change to proportion of pension rights taken as a lump sum 2 3 11
Changes to the definition of pensionable earnings/final pensionable earnings 12 29 11
Changes to early retirement terms (other than ill-health retirement) 23 37 11
Reductions in rates of contribution from either employees or the employer 10 3 9
AVC scheme closed to new members 2 2 5

Table source: Office for National Statistics

Table notes:

  1. AVC = Additional Voluntary Contribution.
  2. Percentages are calculated excluding non-response.
  3. Members may appear in more than one category.
  4. Excludes schemes with fewer than 12 members.

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The most common change in 2011, as in previous years, was increases in member or employer contribution rates. This affected just over half (52 per cent) of members in 2011. Another important change was in terms of indexation, affecting a third of active members in 2011 compared with 16 per cent in 2010; this is likely to be associated with the move from RPI to CPI (see Chapter 5).

Defined contribution schemes were also asked which of a list of possible changes had been implemented since 6 April 2010. Table 9.2 shows the main results (in the 2011 column) and compares them with results for previous years. The most common change in 2011 was an increase in the range of funds offered, affecting 46 per cent of active members. However, 28 per cent were in schemes which decreased the range of funds on offer. 35 per cent were in schemes or sections of schemes which had closed to new entrants (although with an alternative scheme or section offered).

Table 9.2: Proportion of active members of private sector defined contribution occupational pension schemes: by changes made to the scheme since 6 April of previous year (UK, percentages)

  2009 2010 2011
Increase in the range of funds offered 33 34 46
Scheme closed to new entrants (with an alternative offered)  4 8 35
Increases in rates of contribution from either employees or the employer 24 34 29
Decrease in the range of funds offered 22 9 28
Changes to eligibility rules for other reasons 18 6 22
Changes to membership eligibility, to make eligibility more open 15 19 21
Changes to dependents' benefits to make them more valuable 4 6 18
Reductions in rates of contribution from either employees or the employer 23 21 17
Other changes in rates of contributions where overall effects of change cannot be discerned 6 9 15

Table source: Office for National Statistics

Table notes:

  1. Percentages are calculated excluding non-response.
  2. Members may appear in more than one category.
  3. .. indicates cells that have been suppressed to protect confidentiality.
  4. Excludes schemes with fewer than 12 members.

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Working beyond normal pension age

The survey also asked the question: ‘If a member chooses to work beyond the normal pension age for benefits, does the scheme allow the individual to draw a pension at the same time?’

Table 9.3 shows that 59 per cent of active members of defined benefit schemes were able to continue working and draw a pension at the same time in 2011, falling from 73 per cent in 2008. Only 8 per cent of active members of defined benefit schemes in 2011 (19 per cent in 2008) could choose between a full or partial pension while continuing to work.

81 per cent of active members of defined contribution schemes were able to continue working and draw a pension at the same time in 2011 (85 per cent in 2008). Only 21 per cent could choose between a full or partial pension while continuing to work.

Table 9.3: Proportion of active members of private sector occupational pension schemes which allow members to work beyond normal pension age: by benefit structure and whether a pension can be drawn while continuing to work, 2011 (UK, percentages)

  Defined benefit Defined contribution
Yes, but only their full pension 51 60
Yes, a full or partial pension 8 21
No 32 18
Other 9 1

Table source: Office for National Statistics

Table notes:

  1. Percentages are calculated excluding non-response.
  2. Excludes schemes with fewer than 12 members.

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Finally, schemes were asked whether the employer would continue to contribute to the member’s pension if the member continued to work beyond normal pension age. In defined benefit schemes, 91 per cent of active members (excluding non-response) were in schemes where the employer would continue to contribute. This compares with 84 per cent in 2008. Table 9.4 shows what might happen to the pension if the employer continued to contribute, with some schemes offering more than one alternative: 88 per cent of active members were in schemes where the pension might continue to accrue benefits as before; and 14 per cent were in schemes where the pension built up until normal pension age might be deferred with an actuarial increase.

Table 9.4: Proportion of active members of private sector defined benefit schemes where an employer continues to contribute to the pension when member works beyond normal pension age: by what happens to pension, 2011 (UK, percentages)

Pension continues to accrue benefits as before   88
Pension built up until the normal pension age is deferred with an actuarial increase   14
Pension built up until the normal pension age is not actuarially increased   2
Other   11

Table source: Office for National Statistics

Table notes:

  1. Percentages are calculated excluding non-response.
  2. Members may appear in more than one category.
  3. Excludes schemes with fewer than 12 members.

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Table 9.5: Proportion of active members of private sector defined contribution schemes where an employer continues to contribute to the pension when member works beyond normal pension age: by what happens to pension, 2011 (UK, percentages)

Annuity purchase deferred beyond normal pension age 88
Annuity purchase deferred beyond normal pension age and income withdrawals permitted from members' accounts 3
Other, not specified above 17

Table source: Office for National Statistics

Table notes:

  1. Percentages are calculated excluding non-response.
  2. Members may appear in more than one category.
  3. Excludes schemes with fewer than 12 members.

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In defined contribution schemes, 91 per cent of active members (excluding non-response) were in schemes where the employer would continue to contribute. This compares with 82 per cent in 2008. Table 9.5 shows what would happen to the pension if the employer continued to contribute: 88 per cent of active members would have the annuity purchase deferred beyond normal pension age.

Background notes

  1. 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.

Supporting information

Further information

Executive Summary: OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. The Executive Summary gives the key findings from each chapter.
Chapter 1: Introduction - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 1 introduces the report, explains the background to the survey and explains which results appear in which chapter.
Chapter 2: Scheme Numbers - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 2 provides estimates of the number of occupational pension schemes.
Chapter 3: Scheme Membership - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 3 provides estimates occupational pension scheme membership.
Chapter 4: Contributions - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 4 provides estimates of contribution rates to occupational pension schemes.
Chapter 5: Benefits in Defined Benefit Schemes - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 5 provides estimates on benefits provided to those in defined benefit occupational pension schemes.
Chapter 6: Benefits in Defined Contribution Schemes - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 6 provides estimates on benefits provided to those in defined contribution occupational pension schemes.
Chapter 7: Very Small Schemes - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 7 provides estimates relating to occupational pension schemes with 2 to 11 members.
Chapter 8: Winding Up Schemes - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 8 provides estimates on schemes in the process of winding up.
Chapter 10: Methodology - OPSS Annual Report, 2011 - The annual report of the Occupational Pension Schemes Survey presents results including membership, contribution rates and benefits relating to occupational pension schemes. Chapter 10 provides information on the survey methodology.
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