Date: 27 October 2011
Women’s State Pension Age is rising, but more women will receive the full Basic State Pension in future and its purchasing power will strengthen.
Pension Trends Chapter 5, published today by the Office for National Statistics, reveals that in September 2010 only 48 per cent of female pensioners received a full Basic State Pension (BSP), compared with 87 per cent of male pensioners. Many women in the current generation of pensioners failed to build up full or near-full BSP entitlement under the system in place before 6 April 2010, mainly because of broken work histories and part-time work patterns.
However, as a result of legislative changes, 95 per cent of women reaching State Pension Age (SPA) in Great Britain in 2030/31 are expected to receive a full BSP.
The purchasing power of the BSP is also set to rise. This is because the Pensions Act 2007 re-linked BSP increases with earnings and in 2010 the Government introduced the ‘triple lock’ policy guaranteeing that BSP will be increased each year by average earnings growth, inflation or 2.5 per cent, whichever is higher. Modelling by the Department for Work and Pensions (DWP) suggests that by 2030 the purchasing power of BSP would increase by almost half.
Nevertheless, DWP modelling suggests that 60 per cent of women reaching SPA in 2016-20 will have state pension entitlements of less than £140 per week in 2011/12 earnings terms.
Today’s release also provides details of recent legislation on pensions (Pension Trends Chapter 1) and includes the 2010 report of the Occupational Pension Schemes Survey and the accompanying Statistical Bulletin.
The report of the Occupational Pension Schemes Survey (OPSS) 2010 reveals that active (employee) membership of occupational pension schemes continues to fall:
• The highest number of active members was recorded in 1967, when there were 12.2 million. In 2010 there were 8.3 million active members, the lowest level since the 1950s.
• Since 2004, public sector active membership has overtaken private sector active membership as numbers in the private sector have fallen sharply. In 2010, almost two-thirds of active members were in the public sector.
Average contribution rates in the private sector in 2010 were lower in defined contribution (DC) schemes than in defined benefit (DB) schemes:
• The average employee in a DB scheme contributed 5.1 per cent of salary (excluding bonuses) to their pension, compared with 2.7 per cent in DC schemes.
• Average employer contribution rates were 15.8 per cent in DB schemes and 6.2 per cent in DC schemes.
This release also covers the Occupational Pension Schemes Survey 2010 annual report available at www.ons.gov.uk/ons/rel/pensions/occupational-pension-scheme-survey-annual-report/2010-annual-report/index.html and the Statistical Bulletin, available at www.ons.gov.uk/ons/rel/fi/occupational-pension-schemes-survey/2010/index.html.
A Green Paper published by the Department for Work and Pensions (DWP) in April 2011 included a proposal to replace the two tier system with a single tier, flat-rate state pension set just above the standard guarantee credit level for Pension Credit, at £140 per week.
Defined benefit (DB) occupational pension schemes are those in which the rules specify the rate of benefits to be paid. The most common DB schemes are ‘final salary’, but ‘career average’ schemes, which use average earnings over the whole career as the basis for calculating benefits, are becoming more common.
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