The Office for National Statistics has recorded a significant downwards trend in employee membership of private sector defined benefit (DB) schemes – down from 34 per cent in 1997 to 9 per cent in 2011.
DB schemes are those which specify the rate of benefits to be paid with the most common being one in which the benefits are based on the number of years of pensionable service, the accrual rate and final salary. This is revealed today in Pension Trends Chapter 7: Private pension scheme membership which also discloses that 48 per cent of UK employees were members of an employer-sponsored pension scheme in 2011, falling below 50 per cent for the first time since the series began in 1997.
Pension Trends Chapter 8: Pension contributions states that in 2010 the average employer contribution rate for private sector DB occupational pension schemes was 15.8 per cent, compared with 6.2 per cent for DC occupational schemes. Starting in October 2012, employers will have a duty to automatically enrol all eligible employees into a qualifying workplace pension and contribute on their behalf.
Pension Trends Chapter 6: Private Pensions reports that the number of people contributing to personal pensions continued to fall, from 6.4 million in 2008/9 to 6 million in 2009/10. Pension schemes are designed to provide ‘replacement income’ for those no longer earning an income through employment and are normally made up of a state and a non-state component.
Additionally, a fall occurred in the number of self-employed men working full-time in Great Britain belonging to a private pension scheme, falling to 37 per cent in 2010 from 64 per cent recorded in 1998/9.
Pension Trends Chapter 7 points to a difference in society when it comes to retirement, as the higher the weekly earnings of full-time employees, the more likely they are to belong to an employer-sponsored pension, and the lower their earnings, the less likely are they to belong.
With a lower total pension provision than many other OECD countries, a pensions gap has been created. The gross replacement rates of mandatory pension schemes for average earners include highs of over 95 per cent in Iceland and Greece but is 32 per cent in the UK. This does not take into account the changes made in the Pensions Act 2011, moving the indexing of state pensions from the Retail Price Index (RPI) to the Consumer Prices Index (CPI).
All three Chapters of Pensions Trends can be found at http://www.ons.gov.uk/ons/about-ons/our-statistics/publications/pension-trends/index.html
Private (non-state) pensions comprise occupational pension schemes for private sector and public sector employees as well as personal pensions, which include stakeholder pensions.
Further details on private pensions can be found in Pension Trends Chapter 6 at www.ons.gov.uk/ons/rel/pensions/pension-trends/chapter-6--private-pensions--2012-edition-/index.html
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