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Chapter 3: Scheme Membership - OPSS Annual Report, 2011 This product is designated as National Statistics

Released: 19 September 2012 Download PDF

Abstract

'Chapter 3: Scheme membership' of the Occupational Pension Schemes Survey (OPSS) annual report 2011 gives information on the estimated number of members of occupational pension schemes by scheme characteristics such as sector, status, size and benefit structure.

Introduction

This chapter looks at the membership of occupational pension schemes in the private and public sectors. The chapter starts with total membership. It then looks in more detail at active members, pensioners and members with preserved pension entitlements. Finally, it looks at conditions for membership and normal pension ages.

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 (or have contributions made on their behalf) to the pension scheme.

Pensioner members are members who are receiving pension payments from the scheme, and their dependants and pension credit members1. Pensioner members exclude pensioners who have had annuities bought in their own name. Information on active members and pensioner members has been collected since the first survey in 1953.

Most members with preserved pension entitlements (‘deferred members’) are former employees who have preserved their pension rights within a scheme but are not yet receiving pension payments. This category also includes widows, widowers, other dependants and pension credit members with some preserved pension. Information on members with preserved pension entitlements has been collected since 1983.

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 rights in a previous employer’s scheme. Hence, all estimates of membership include an element of double counting and are not counts of individuals.

The time series in this chapter show ‘breaks’ between 1999 and 2000, between 2005 and 2006 and between 2007 and 2008. The first of these breaks is because of a change in the definition of the  private and public sectors; the second is due to a change in the methodology used for weighting the results; and the third is due to improvements to the questionnaire in 2008 (see Chapter 10).

All breaks are explained in the footnotes to the tables and graphs. Comparisons of results before and after the changes should be treated with caution. In particular, part of the increase in pensions in payment and preserved pension entitlements between 2007 and 2008 shown in this chapter may be due to changes to the questionnaire.

Notes for Introduction

  1. Pension credit members are former spouses of members who have gained their rights as a result of a pension credit following pension sharing on divorce.

Total membership

Total membership of occupational pension schemes consists of active members, members receiving pension payments and members with preserved pension entitlements.

Figure 3.1: Number of members of occupational pension schemes: by membership type, 1991 to 2011 (UK, millions)

Number of members of occupational pension schemes: by membership type
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics

Notes:

  1. The 2005 survey did not cover the public sector and a total figure is therefore not available.
  2. Due to changes in the definition of the private and public sectors, estimates for 2000 and onwards differ from earlier years. From 2000 organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  3. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.
  4. Changes to the part of the questionnaire used to estimate pensions in payment and preserved pension entitlements in 2008 mean that comparisons with 2007 and earlier should be treated with caution.

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In 2011, total membership was estimated to be 27.2 million, the same as in 2010 (Figure 3.1 and Table 3.2). There were an estimated 14.2 million members of private sector schemes, down from 14.7 million in 2010. Public sector schemes had some 13.0 million members, compared with 12.5 million in 2010. For private sector schemes, Table 3.3 shows the number of members by benefit structure (see Chapter 1).

The figures relate to members of schemes and sections of schemes. Hybrid schemes (those which offer benefits on either a defined benefit or a defined contribution basis to the same group of members) were treated as defined benefit schemes for the purpose of the survey. All public sector schemes in the survey are defined benefit.

Table 3.2: Number of members of occupational pension schemes: by membership type and sector, 1991 to 2011 (UK, millions)

    1991 1995 2000 2004 2005 2006 2007 2008 2009 2010 2011
Active members 10.7 10.3 10.1 9.8   9.2 8.8 9.0 8.7 8.3 8.2
Private sector 6.5 6.2 5.7 4.8 4.7 4.0 3.6 3.6 3.3 3.0 2.9
Public sector 4.2 4.1 4.4 5.0   5.1 5.2 5.4 5.4 5.3 5.3
Pensions in payment 7.0 8.5 8.2 9.0   8.2 8.5 8.8 9.0 9.0 9.2
Private sector 3.8 5.0 5.2 5.6 5.3 4.6 4.8 5.0 5.1 5.0 5.0
Public sector 3.2 3.5 3.0 3.4   3.5 3.7 3.9 3.9 4.0 4.2
Preserved pension entitlements 4.5 7.0 6.7 9.3   9.4 9.4 9.9 10.1 9.8 9.8
Private sector 3.3 5.2 5.2 7.1 6.4 6.5 6.3 6.7 6.6 6.6 6.3
Public sector 1.2 1.8 1.5 2.2   2.9 3.1 3.2 3.5 3.2 3.4
Total 22.2 25.8 25.0 28.1   26.7 26.7 27.7 27.7 27.2 27.2
Private sector 13.6 16.4 16.1 17.5 16.4 15.2 14.7 15.3 15.0 14.7 14.2
Public sector 8.6 9.4 8.9 10.6   11.5 12.0 12.4 12.7 12.5 13.0

Table source: Office for National Statistics

Table notes:

  1. The 2005 survey did not cover the public sector and a total figure is therefore not available.
  2. Due to changes in the definition of the private and public sectors, estimates for 2000 and onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  3. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.
  4. Changes to the part of the questionnaire used to estimate pensions in payment and preserved pension entitlements in 2008 mean that comparisons with 2007 and earlier should be treated with caution.

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Of the 14.2 million members of private sector schemes in 2011, 12.1 million (85 per cent) were in defined benefit schemes and 2.1 million were in defined contribution schemes. However, while almost all private sector pensions in payment (99 per cent) were defined benefit pensions (see Pensioner members), only two-thirds of active members were in defined benefit schemes – with the other third in defined contribution schemes (Table 3.3).

There was a fall in active membership of private sector defined benefit schemes from 3.0 million in 2006 to 2.1 million in 2010 and 1.9 million in 2011, while active membership of private sector defined contribution schemes remained fairly stable at around a million (0.9 million in 2011).

Table 3.3: Number of members of private sector occupational pension schemes: by membership type and benefit structure, 2004 to 2011 (UK, millions)

  2004 2005 2006 2007 2008 2009 2010 2011
Active members 4.8 4.7 4.0 3.6 3.6 3.3 3.0 2.9
Defined benefit 3.6 3.7 3.0 2.7 2.6 2.4 2.1 1.9
Defined contribution 1.2 1.0 1.0 0.9 1.0 1.0 1.0 0.9
Pensions in payment 5.6 5.3 4.6 4.8 5.0 5.1 5.0 5.0
Defined benefit 5.4 5.2 4.6 4.8 4.9 5.0 5.0 4.9
Defined contribution 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.1
Preserved pension entitlements 7.1 6.4 6.5 6.3 6.7 6.6 6.6 6.3
Defined benefit 5.6 5.2 5.3 5.4 5.6 5.5 5.4 5.2
Defined contribution 1.1 0.9 1.2 0.9 1.1 1.1 1.2 1.1
Total 17.5 16.4 15.2 14.7 15.3 15.0 14.7 14.2
Defined benefit 14.6 14.1 12.9 12.9 13.1 12.9 12.5 12.1
Defined contribution 2.4 2.0 2.3 1.8 2.2 2.1 2.2 2.1

Table source: Office for National Statistics

Table notes:

  1. In 2004 and 2005, breakdowns by benefit structure exclude schemes that were winding up.
  2. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.
  3. Changes to the part of the questionnaire used to estimate pensions in payment and preserved pension entitlements in 2008 mean that comparisons with 2007 and earlier should be treated with caution.
  4. Figures may not add due to rounding.

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Active membership

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. It should be noted that, in general, there are no active members in schemes which are frozen or winding up, as members of such schemes can no longer be accruing benefits.

There was a marked increase in the number of active members between 1953 and 1967, from 6.2 million to 12.2 million (Figure 3.4). In 2011, there were an estimated 8.2 million active members of occupational pension schemes. In the private sector, there were 2.9 million in 2011, compared with 6.5 million in 1991 and 8.1 million at the peak (in 1967). The decline in numbers of active members in the private sector over the last 20 years reflects the fall in active membership of private sector defined benefit schemes, to 1.9 million in 2011.

On the other hand, active membership of public sector schemes rose from 4.2 million in 1991 to 5.4 million in 2009, despite the reclassification of some large public sector schemes to the private sector from 2000. There were an estimated 5.3 million active members in the public sector in 2011. Some of the drop in active membership of occupational pension schemes will have been covered by the growth in the number of people contributing to group personal pensions. The Annual Survey of Hours and Earnings pensions release provides information on pension membership for both occupational and contract based pensions.

Figure 3.4: Number of active members of occupational pension schemes: by sector, 1953 to 2011 (UK, millions)

Number of active members of occupational pension schemes: by sector
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics

Notes:

  1. The 2005 survey did not cover the public sector.
  2. Due to changes in the definition of the private and public sectors, estimates for 2000 onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  3. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.

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Figure 3.5 shows the active membership of open private sector schemes by benefit structure. Active membership of open private sector defined benefit schemes fell sharply between 2000 and 2006, from 4.1 million to 1.4 million, followed by a more gradual decline to 0.9 million in 2011. Active membership of open private sector defined contribution schemes, has remained around 1.0 million since 1995 (the figure for 2011 was 0.8 million).

Figure 3.5: Number of active members of open private sector occupational pension schemes: by benefit structure, 1995 to 2011 (UK, millions)

Number of active members of open private sector occupational pension schemes: by benefit structure
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics

Notes:

  1. Due to changes in the definition of the private and public sectors, estimates for 2000 onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  2. Figures for active members of defined benefit schemes include active members of hybrid schemes, except in 1995 and 2000 when hybrid schemes were excluded.
  3. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.

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Table 3.6 shows that in 2011, 65 per cent of active members in public sector defined benefit schemes were in open schemes, compared with only 45 per cent of active members of private sector defined benefit schemes. Most active members of private sector defined contribution schemes (90 per cent) were in open schemes.  Care should be taken when comparing the public sector estimates by scheme status for 2010 and 2011 shown in Table 3.6 with earlier years. In 2010, some of the largest public sector schemes in the sample which were previously providing information only at scheme level, not for each of their sections separately, were asked to provide section-level information (see Chapter 10).

Before 2010, the members of closed sections of these schemes would have appeared in the ‘open’ category if the scheme as a whole was open. In 2010, such membership is classified in the ‘closed’ category. In the 2011 survey, all public sector schemes in the sample were asked to return information for each of their sections.

Table 3.6: Number of active members of occupational pension schemes: by status, size, sector and benefit structure, 2011 (UK, millions)

    Private Public Total Total
DB DC Total DB DB
               
Open 0.9 0.8 1.7 3.4 4.3 5.1
10,000+ 0.6 0.4 1.1 3.4 4.0 4.4
5,000 to 9,999 0.0 0.1 0.2 0.0 0.1 0.2
1,000 to 4,999 0.1 0.1 0.3 0.0 0.2 0.3
100 to 999 0.0 0.1 0.1 0.0 0.0 0.1
2 to 99 0.0 0.1 0.1 0.0 0.0 0.1
Closed 1.1 0.1 1.1 1.9 2.9 3.0
10,000+ 0.7 0.0 0.8 1.8 2.5 2.5
5,000 to 9,999 0.1 0.0 0.1 0.0 0.2 0.2
1,000 to 4,999 0.1 0.0 0.1 0.1 0.2 0.2
100 to 999 0.1 0.0 0.1 0.0 0.1 0.1
2 to 99 0.0 0.0 0.0 0.0 0.0 0.0
Total 1.9 0.9 2.9 5.3 7.2 8.2
10,000+ 1.3 0.5 1.8 5.2 6.5 7.0
5,000 to 9,999 0.2 0.1 0.3 0.1 0.2 0.4
1,000 to 4,999 0.3 0.1 0.4 0.1 0.4 0.5
100 to 999 0.1 0.1 0.2 0.0 0.1 0.2
2 to 99 0.0 0.1 0.1 0.0 0.0 0.1

Table source: Office for National Statistics

Table notes:

  1. DB = defined benefit; DC = defined contribution.

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Table 3.6 also shows that in 2011, 85 per cent of active members of occupational pension schemes belonged to schemes with 10,000+ members, while 1 per cent belonged to schemes with 2 to 99 members. Almost all active members of public sector defined benefit schemes belonged to schemes with 10,000+ members (97 per cent), while 70 per cent of active members of private sector defined benefit schemes – and 73 per cent of active members of open private sector defined benefit schemes – were in 10,000+ schemes. Active membership of defined contribution schemes in the private sector was more evenly distributed by size of scheme (Figure 3.7); nevertheless, half the active members of such schemes were in the 10,000+ membership band.

Figure 3.7: Number of active members of private sector occupational pension schemes: by size and benefit structure, 2011 (UK, millions)

Number of active members of private sector occupational pension schemes: by size and benefit structure
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics

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Table 3.8: Number of active members of private sector occupational pension schemes: by size and route to contracting out 2011 (UK, millions)

    COSRS COMBS COMPS Total contracted out Total not contracted out
10,000+ 1.1 0.1 0.1 1.2 0.6
5,000 to 9,999 0.1 0.0 0.0 0.2 0.1
1,000 to 4,999 0.2 0.0 0.0 0.3 0.2
100 to 999 0.1 0.0 0.0 0.1 0.1
2 to 99 0.0 0.0 0.0 0.0 0.1
Total 1.6 0.1 0.2 1.8 1.1

Table source: Office for National Statistics

Table notes:

  1. COSRS = Contracted Out Salary Related Scheme; COMBS = Contracted Out Mixed Benefit Scheme; COMPS = Contracted Out Money Purchase Scheme.
  2. Excludes non-response to question relating to contracted out status.

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Table 3.8 presents results by contracted out status for private sector schemes. 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). 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. Schemes can contract out in one of three ways: salary related (COSRS), money purchase (COMPS) or mixed benefit (COMBS) (see Chapter 2). The ability to contract out of a defined contribution (money purchase) scheme ceased from 6 April 2012.

Most public sector schemes are contracted out, but this is not the case in the private sector. Of the 2.9 million active members of private sector schemes in 2011, 63 per cent were contracted out. Of these, 86 per cent were in schemes contracted out as salary-related schemes (COSRS). These are occupational pension schemes that have retirement benefits based on salary, and which have been contracted out according to section 9 (2) of the Pensions Schemes Act 1993 (see Chapter 2).

Table 3.9: Proportion of active members of contracted out private sector occupational pension schemes: by benefit structure and route to contracting out, 1979 to 2011 (UK, percentages)

  Defined benefit Defined contribution COSRS COMBS COMPS All contracted out schemes
1979 79
1983 78
1987 78
1991 84
1995           80
2000 83
2004 72 7 63 11 5 79
2005 74 2 64 7 6 76
2006 71 5 66 5 5 76
2007 71 6 63 5 9 77
2008 65 5 59 5 7 71
2009 63 6 57 5 7 69
2010 60 7 56 4 7 67
2011 58 5 54 3 3 63

Table source: Office for National Statistics

Table notes:

  1. Percentages may not add due to rounding.
  2. COSRS = Contracted Out Salary Related, COMBS = Contracted Out Mixed Benefit, COMPS = Contracted Out Money Purchase.
  3. Due to changes in the definition of the private and public sectors, estimates for 2000 onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  4. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.

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The proportion of active members who belonged to contracted out private sector schemes increased from 79 per cent in 1979 to peak at 84 per cent in 1991, before falling to 63 per cent in 2011 (Table 3.9). In 2011, 58 per cent of active members were in contracted out defined benefit schemes and 5 per cent were in contracted out defined contribution schemes.

Changes in scheme membership between 2010 and 2011

In addition to their active employee membership at 6 April 2011, schemes were asked for the number of members entering and leaving during the 12 months ending on that date. Table 3.10 shows the results for both private sector and public sector schemes. The retirements category includes retirements for all reasons, whether before or at normal pension age, or due to ill health.

For private sector schemes, there were an estimated 340,000 entrants to schemes in the 12 months to April 2011 (compared with 270,000 in the 12 months to April 2010). In the 12 months to April 2011, the total number of exits from schemes was 740,000 (there were 810,000 in the previous year). Thus there was a net decrease of 390,000 (2011), compared with 540,000 the previous year.

Of total entrants to private sector schemes in the 12 months to April 2011, 29 per cent joined open defined benefit schemes and 48 per cent joined open defined contribution schemes. Of total exits from private sector schemes during this period, 34 per cent left with preserved pension entitlements, 17 per cent left because of retirement and 19 per cent died (either while in pensionable service, with a preserved entitlement, or while in receipt of a pension). Under 10 per cent left with a transfer payment, and a similar proportion left with a refund of contributions or no other benefit. For 10 per cent of exits, no reason was given.

For public sector schemes (defined benefit), there were an estimated 410,000 entrants to schemes in the 12 months to April 2011. For the same period, the total number of exits from schemes was 610,000. Thus there was a net decrease of 200,000. However, these figures should be treated with caution as non-response from any public sector scheme is likely to have a major impact on results, particularly when the non-response affects only one side of the balance (for example, exits are reported but entrants are not).

The most common reason for leaving the public sector was leaving with a preserved pension entitlement, which accounted for 43 per cent of all exits in 2011. Compared with the private sector, there was a higher proportion of exits due to retirement. An estimated 14 per cent died (either while in pensionable service, with a preserved entitlement, or while in receipt of a pension). 10 per cent left with a refund of contributions or no other benefit, and 5 per cent with a transfer payment.

Table 3.10: Number of entrants to and exits from occupational pension schemes: by sector, benefit structure and status, 2011 (UK, thousands)

    Private sector Public sector
    Defined benefit Defined contribution Total Defined benefit Total
    Open Closed Frozen Open Closed Frozen   Open Closed Frozen  
Total entrants 100 70 0 170 0 0 340 340 70 0 410
Total exits 150 250 150 140 20 30 740 420 190 0 610
  Of which:                      
  Retirement 30 60 30 10 0 0 120 100 60 0 160
  Left with preserved pension entitlement 40 70 60 70 10 10 250 210 50 0 260
  Left with transfer payment 10 10 10 20 0 20 60 20 0 0 30
  Left with refund of contributions or no other benefit 20 0 0 20 0 0 40 20 40 0 60
  Deaths 30 60 50 0 0 0 140 60 30 0 90
  Other reason 10 30 10 0 0 0 50 10 0 0 10
Net increase/decrease -50 -170 -150 30 -10 -30 -390 -80 -120 0 -200

Table source: Office for National Statistics

Table notes:

  1. Excluding schemes with fewer than 12 members.
  2. Some exits were unexplained; therefore the numbers of exits with a reason given do not add up to the total number of exits.
  3. Non-response in public sector schemes may have a major impact on results.

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Pensioner members

Pensioner members are members of occupational pension schemes who are in receipt of pension payments. Open, closed, frozen and winding up schemes can have pensioner members. While such members are mainly former employees of the organisation, widows, widowers and other dependants of former employees who are receiving pensions are also classified as pensioner members in this survey.

It is possible for an individual to receive a pension from more than one scheme, following successive (or possibly simultaneous) membership of different schemes, or as a former employee member of one scheme and as the dependant of a former employee member or a pension credit member of a second scheme.

The estimates presented in this section are therefore estimates 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. They do not include annuities purchased by members of defined contribution occupational pension schemes on retirement.

Figure 3.11: Number of pensions in payment for occupational pension schemes: by sector, 1953 to 2011 (UK, millions)

Number of pensions in payment for occupational pension schemes: by sector
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics

Notes:

  1. Due to changes in the definition of the private and public sectors, estimates for 2000 and onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  2. The 2005 survey did not cover the public sector and a total figure is therefore not available.
  3. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.
  4. Changes to the part of the questionnaire used to estimate pensions in payment in 2008 mean that comparisons with 2007 and earlier should be treated with caution.

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There was a steady increase in the total number of pensions in payment between 1953 and 2004, from 0.9 to 9.0 million (Figure 3.11). This number then 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. Between 2006 and 2011, the total number of pensions in payment rose from 8.2 million to 9.2 million. Private sector pensions in payment rose to 5.0 million over the same period; public sector pensions in payment rose from 3.5 in 2006 to 4.2 million in 2011.

As in previous years, in 2011 nearly all pensions in payment were paid from defined benefit schemes or sections of schemes (Table 3.3). Only 1 per cent of pensions were paid from defined contribution schemes and sections of schemes. There are two main reasons for this:

  • The majority of defined contribution scheme members transfer out of the scheme at retirement when they purchase an annuity.

  • Defined contribution schemes tend to be more recently established and therefore fewer members have reached retirement age.

Table 3.12: Number of pensions in payment for occupational pension schemes: by sector, size and type of pensioner, 2011 (UK, millions)

  Former employees Other Rights in winding up schemes Total
       
Private 2.3 0.6 0.1 5.0
  10,000+ 1.6 0.5 .. 3.5
5,000 to 9,999 0.2 0.1 .. 0.5
1,000 to 4,999 0.3 0.1 0.0 0.6
100 to 999 0.2 0.0 0.0 0.4
2 to 99 0.0 0.0 0.0 0.1
           
Public 2.9 0.4 4.2
  10,000+ 2.8 0.4 4.0
5,000 to 9,999 0.0 0.0 0.1
1,000 to 4,999 0.1 0.0 0.1
100 to 999 0.0 0.0 0.0
2 to 99 0.0 0.0 0.0
           
Total 5.2 1.0 0.1 9.2
  10,000+ 4.4 0.9 .. 7.5
5,000 to 9,999 0.2 0.1 .. 0.5
1,000 to 4,999 0.3 0.1 0.0 0.7
100 to 999 0.2 0.0 0.0 0.4
2 to 99 0.0 0.0 0.0 0.1

Table source: Office for National Statistics

Table notes:

  1. .. indicates cells that have been suppressed to protect confidentiality.
  2. The 'other' column includes those receiving pensions who are still working, dependents and pension credit members.
  3. Totals include non-response.

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Table 3.12 shows breakdowns for different types of pensioner. Although schemes provided responses for only 68 per cent of pensions in payment in 2011, the survey found that in the schemes that responded, 84 per cent of pensions in payment were paid to former employees and 15 per cent were paid to dependants and pension credit members; the remaining 2 per cent corresponded to rights in winding up schemes (see Chapter 8).

In the public sector, 96 per cent of pensions in payment were from schemes with 10,000 or more members, compared with 70 per cent for private sector schemes. Pensions in payment relate disproportionately to the largest schemes, as smaller private sector defined benefit schemes often seek to ‘buy out’ pensions in payment with annuities from insurance companies, thereby relieving themselves of longevity risk (the risk that pensioner members will live longer than expected). 

Members with preserved pension entitlements

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. The member is then sometimes known as a ‘deferred pensioner’ or ‘deferred member’ of the scheme.

Deferred members also include widows, widowers, other dependants and pension credit members with some preserved pension. It is generally possible to take a transfer payment into another pension arrangement in place of these rights. As with pensioner members, it is possible for someone to have preserved pension entitlements in more than one scheme, and therefore the estimates do not represent the number of individuals with preserved pension entitlements. They show the number of preserved pensions.

In 2011, as in 2010, the estimated total number of preserved pension entitlements was 9.8 million. Table 3.13 shows breakdowns for different types of preserved pension entitlement. Although schemes provided responses for only 69 per cent of preserved pension entitlements in 2011, the survey found that in the schemes that responded, 96 per cent of preserved pension entitlements belonged to former employees while 4 per cent corresponded to rights in winding up schemes (see Chapter 8).

In 2011, 99 per cent of preserved pension entitlements in the public sector were in schemes with 10,000 or more members, compared with 60 per cent of preserved pension entitlements in the private sector. Only 13 per cent of private sector preserved pension entitlements were held in schemes with fewer than 1,000 members. In 2011, an estimated 84 per cent of members with preserved pension entitlements in private sector schemes were in defined benefit schemes (Figure 3.14).

Table 3.13: Number of preserved pension entitlements for occupational pension schemes: by sector, size and type of deferred member, 2011 (UK, millions)

  Former employees Dependents and pension credit members Rights in winding up schemes Total
       
Private 4.1 0.0 0.3 6.3
  10,000+ 2.6 0.0 .. 3.8
5,000 to 9,999 0.4 0.0 .. 0.7
1,000 to 4,999 0.6 0.0 0.1 1.0
100 to 999 0.4 0.0 0.1 0.7
2 to 99 0.1 0.0 0.0 0.1
            
Public 2.3 0.0 3.4
  10,000+ 2.3 0.0 3.4
5,000 to 9,999 0.0 0.0 0.0
1,000 to 4,999 0.0 0.0 0.0
100 to 999 0.0 0.0 0.0
2 to 99 0.0 0.0 0.0
         
Total 6.4 0.0 0.3 9.8
  10,000+ 4.8 0.0 .. 7.2
5,000 to 9,999 0.5 0.0 .. 0.8
1,000 to 4,999 0.6 0.0 0.1 1.0
100 to 999 0.4 0.0 0.1 0.7
2 to 99 0.1 0.0 0.0 0.1

Table source: Office for National Statistics

Table notes:

  1. .. indicates cells that have been suppressed to protect confidentiality.
  2. Totals include non-response.

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Figure 3.14: Number of preserved pension entitlements in private sector occupational pension schemes: by benefit structure, 2004 to 2011 (UK, millions)

Number of preserved pension entitlements in private sector occupational pension schemes: by benefit structure
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics

Notes:

  1. Excludes schemes that were winding up.
  2. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.
  3. Changes to the part of the questionnaire used to estimate preserved pension entitlements in 2008 mean that comparisons with 2007 and earlier should be treated with caution.

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Table 3.15: Number of preserved pension entitlements in occupational pension schemes: by sector, 1983 to 2011 (UK, millions)

  1983 1987 1991 1995 2000 2004 2005 2006 2007 2008 2009 2010 2011
Private 3.3 5.2 5.2 7.1 6.4 6.5 6.3 6.7 6.6 6.6 6.3
Public 1.2 1.8 1.5 2.2 2.9 3.1 3.2 3.5 3.2 3.4
Total 2.8 3.5 4.5 7.0 6.7 9.3 9.4 9.4 9.9 10.1 9.8 9.8

Table source: Office for National Statistics

Table notes:

  1. No public/private split was available before 1991.
  2. The 2005 survey did not cover the public sector and a total figure is therefore not available.
  3. Due to changes in the definition of the private and public sectors, estimates for 2000 and onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  4. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.
  5. Changes to the part of the questionnaire used to estimate preserved pension entitlements in 2008 mean that comparisons with 2007 and earlier should be treated with caution.

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Table 3.15 shows that the total number of preserved pension entitlements rose from 2.8 million in 1983 to 9.4 million in 2006 and 2007. It reached 9.9 million in 2008 and 10.1 million in 2009 before falling slightly to 9.8 million in 2010 and 2011. The increase between 2007 and 2008 may have been partly due to improvements in the design of the questionnaire (see Chapter 10).

Table 3.15 also shows that since 1991, when the survey began collecting this information broken down by sector, the number of members with preserved pension entitlements has risen faster in the public sector than in the private sector. The public sector number rose from 1.2 million in 1991 to 3.4 million in 2011. The private sector number rose from 3.3 million in 1991 to 6.7 million in 2008 and then fell to 6.3 million in 2011.

Conditions for membership

This section considers the various ways in which membership of a pension scheme in 2011 was restricted to certain categories of employee. It provides estimates of how many active members were in schemes with these restrictions. The results exclude schemes with fewer than 12 members.

In 2011, 1.3 million active members of private sector schemes belonged to open schemes that either had no minimum age restriction for entry, or a minimum age of 16 (Table 3.16). This represented over three-quarters of active membership of open private sector schemes. The proportion was higher for defined benefit schemes (83 per cent) than for defined contribution schemes (72 per cent). Where restrictions (other than a minimum age of 16) applied, most involved a minimum age of 17 or 18.

Table 3.16: Number of active members of private sector occupational pension schemes: by minimum age for entry and benefit structure, 2011 (UK, millions)

  Defined benefit Defined contribution Total
Open      
  16 or no minimum 0.7 0.6 1.3
  17 to 18 0.1 0.2 0.3
  19 or older 0.0 0.0 0.0
Closed to new members 1.1 0.1 1.1
Total 1.9 0.9 2.8

Table source: Office for National Statistics

Table notes:

  1. Excludes schemes with fewer than 12 members.
  2. Totals may not sum due to rounding.

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Another way of restricting membership of an occupational pension scheme (in 2011) was by length of service with the employer. In 2011, 1.3 million active members of private sector schemes belonged to open schemes with no restriction by length of service (Table 3.17). This represents over 80 per cent of active members of open schemes which responded to the question.

Table 3.17: Number of active members of private sector occupational pension schemes: by length of service required for entry and benefit structure, 2011 (UK, millions)

  Defined benefit Defined contribution Total
Open
None 0.8 0.6 1.3
Less than 1 year 0.0 0.2 0.2
1 year or more 0.1 0.0 0.1
Closed to new members 1.1 0.1 1.1
Total 1.9 0.9 2.8

Table source: Office for National Statistics

Table notes:

  1. Excludes schemes with fewer than 12 members.
  2. Totals may not sum due to rounding.

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Automatic enrolment is the practice of making all new employees members of the pension scheme. Employees are given the right to opt out of the scheme. 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 will be staged in from October 2012, starting with the largest employers. An eligible worker is someone who:

  • is not already in a qualifying pension scheme,

  • is aged 22 or over,

  • is under state pension age,

  • earns more than £8,105 a year (this figure may change),

  • works (or usually works) in the UK.

A new defined contribution occupational pension scheme, the National Employment Savings Trust (NEST), provides another option (in addition to existing ones) for employers who do not have a scheme (Pension Trends Chapter 6: Private pensions gives further information on the workplace pension reforms). The qualifying pension scheme need not be an occupational scheme; instead, employers can, for example, organise group personal or stakeholder pensions (which are not covered by this survey).

Table 3.18 shows information, which has been collected from 1995, on the proportion of active members of open private sector occupational schemes by the scheme's approach to whether new employees are automatically made members. It should be noted that the definitions used here will not necessarily be consistent with the definitions used for ‘automatic enrolment’ under the Pensions Act 2011. Given the reforms will be implemented gradually, their impact may not feed through into these estimates immediately.

In 2011, 61 per cent of members were in schemes that automatically made all eligible new employees members of the pension scheme, an increase on previous years (see Table 3.18). 69 per cent of active members of defined benefit schemes and 52 per cent of active members of defined contribution schemes were in schemes where all eligible new employees were automatically made members.

Table 3.18: Proportion of active members of open private sector occupational pension schemes: by benefit structure and the scheme's approach to whether new employees are automatically made members, 1995 to 2011 (UK, percentages)

  Defined benefit   Defined contribution   Total
All Some None All Some None All Some None
1995 43 7 50
2000 43 14 43
2004 47 30 23 28 6 66 41 22 37
2005 54 15 31 31 2 67 48 12 40
2006 63 7 31 28 7 66 50 7 44
2007 55 16 29 44 5 51 51 12 37
2008 62 6 33 41 3 56 52 4 43
2009 63 11 25 52 2 47 58 7 35
2010 61 12 27 51 2 48 56 7 37
2011 69 12 19 52 1 47 61 6 33

Table source: Office for National Statistics

Table notes:

  1. Excludes schemes with fewer than 12 members.
  2. The 1995 and 2000 surveys did not provide figures by benefit structure.
  3. Due to changes in the definition of the private and public sectors, estimates for 2000 onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  4. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.
  5. It should be noted that the definitions used here will not necessarily be consistent with the definitions used for ‘automatic enrolment’ under the Pensions Act 2011.

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Normal pension age

Normal pension age is broadly defined as the age at which active members and deferred members become entitled to receive their full benefits. Schemes were asked to give the normal pension age which applied to the majority of their members. Since the Barber judgement of the European Court of Justice on 17 May 1990, the same normal pension age must apply to both men and women.

Generally, normal pension ages in the private sector are either 60 or 65, but a small minority of schemes choose another age (Table 3.19). In 2011, nearly three-quarters of active members of private sector schemes had a normal pension age of 65, compared with around half in 2004. No active members of public sector schemes were reported as having a pensionable age of 65 in the 2004 survey, but several public sector schemes have changed their normal pension age to 65 since then (see Table 3.22). In 2011, 44 per cent of active members of public sector schemes had a normal pension age of 65.

The 'Rule of 85', which allowed members of the Local Government Pension Scheme (LGPS) whose age and service total in excess of 85 to retire at 60 with an unreduced pension, was abolished for new members in England and Wales from 1 October 2006, when a normal pension age of 65 was introduced. Existing members of the scheme on 1 October 2006 qualifying under the Rule of 85 were protected by transitional arrangements until 1 April 2008, when a ‘new look LGPS’ was introduced in England and Wales, and older scheme members benefit from full or partial protection (depending on their date of birth) thereafter.

Similar arrangements apply in the case of members of the LGPS in Scotland, where the new scheme was introduced from 1 April 2009 (see Local Government Pension Scheme (England and Wales) and Scotland). The changes to the LGPS have affected the public sector figures in Table 3.19. In 2004, there were 1.9 million active members in the ‘Between 61 and 64’ category; since 2008, the figure in this category has been zero as these members are placed in the ‘At 65’ category.

Changes being implemented following the report by the Independent Public Service Pensions Commission chaired by Lord Hutton of Furness (see Chapter 1) do not affect the estimates for 2011.

Table 3.19: Number of active members of occupational pension schemes: by normal pension age, sector and benefit structure, 2011 (UK, millions)

  Private Public Total Total
DB DC Total DB DB  
Under 60 0.0 0.0 0.0 0.4 0.4 0.4
At 60 0.5 0.2 0.6 2.6 3.1 3.2
Between 61 and 64 0.1 0.0 0.1 0.0 0.1 0.1
At 65 1.4 0.7 2.1 2.3 3.7 4.5

Table source: Office for National Statistics

Table notes:

  1. DB = defined benefit; DC = defined contribution.

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The proportion of active members belonging to private sector schemes with a normal pension age of 65 fell from 75 per cent in 1975 to 51 per cent in 2004 (Table 3.20). This proportion rose to 74 per cent in 2011. In 1975, 21 per cent of active members of private sector schemes belonged to schemes with a normal pension age of 60. This figure peaked at 41 per cent in 2004; in 2011, 22 per cent of active members of private sector schemes belonged to schemes with a normal pension age of 60. Figure 3.21 shows membership of private sector schemes by the most prevalent normal pension ages (60 and 65) since 1971.

Table 3.20: Number of active members of private sector occupational pension schemes: by normal pension age, 1971 to 2011 (UK, millions)

  Under 60 At 60 Between     61 and 64 At 65 Over 65
1971 0.2 1.6 0.2 4.6
1975 0.0 1.2 0.2 4.4
1979 0.1 1.7 0.1 4.2
1983 0.1 1.5 0.4 3.8
1987 0.0 2.0 0.3 3.5
1991 0.0 2.1 0.6 3.8
1995 0.0 1.9 0.6 3.6  
2000 0.0 1.6 0.3 3.7
2004 2.0 0.4 2.4
2005          
2006 .. 1.1 0.3 2.5 ..
2007 .. 1.1 0.2 2.2 ..
2008 .. 0.9 0.2 2.5 ..
2009 0.0 0.8 0.2 2.3 0.0
2010 0.0 0.7 0.1 2.2 0.0
2011 0.0 0.6 0.1 2.1 0.0

Table source: Office for National Statistics

Table notes:

  1. .. indicates cells that have been suppressed to protect confidentiality.
  2. No results are available from the 2005 survey.
  3. Due to changes in the definition of the private and public sectors, estimates for 2000 onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  4. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.

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In 2011, public sector schemes applied a range of normal pension ages. For some public sector schemes pension age depends on the length of service, although such schemes still have a normal pension age. Table 3.22 shows the position for the main public sector schemes in 2011. Readers should note that this table is not a product of the survey, and does not have National Statistics status.

A new pension scheme was established in 2005 for the Armed Forces, replacing the 1975 defined benefit scheme. The new scheme offers a full pension at age 65. The old scheme offered a full pension at age 55 and an immediate pension after a fixed number of pensionable years’ service (16 years for officers and 22 years for all other ranks).

Figure 3.21: Number of active members of private sector occupational pension schemes with normal pension ages of 60 and 65 years, 1971 to 2011 (UK, millions)

Number of active members of private sector occupational pension schemes with normal pension ages of 60 and 65 years
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics

Notes:

  1. Due to changes in the definition of the private and public sectors, estimates for 2000 onwards differ from earlier years. From 2000, organisations such as the Post Office and the BBC were reclassified from the public to the private sector.
  2. Changes to methodology for 2006 onwards mean that comparisons with 2005 and earlier should be treated with caution.

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In 2006, public sector schemes were subject to significant review and this resulted in changes to the normal pension age of a number of public sector schemes.

New schemes for the police and firefighters were introduced on 6 April 2006, and their normal pension ages were increased by five years1.

The new scheme for teachers, into which all members were transferred, came into effect on 1 January 2007 and had a normal pension age of 65 instead of 60 in the old scheme. The new schemes for the civil service (from 30 July 2007) and the NHS (from 1 April 2008) also raised the normal pension age from 60 to 65, although existing members of the old schemes were not automatically transferred into the new scheme and therefore continue to have a normal pension age of 60.

The ‘new look LGPS’, launched in England and Wales on 1 April 2008 and in Scotland on 1 April 2009, retained the recently established normal pension age of 65, although some local authority employees could still retire at age 60 under the Rule of 85.

Table 3.22: Normal pension ages for major public sector occupational pension schemes, 2011 (UK, age)

Old scheme New scheme
Armed Forces 55 65
Police 50 55
Firefighters 55 60
Civil Service 60 65
NHS 60 65
Teachers 60 65
Local Government 65 65

Table notes:

  1. Members of the Armed Forces, the police and firefighters with sufficient service can retire earlier (see Chapter 5).
  2. A small group of National Health Service (NHS) staff has the right to retire at 55.
  3. Teachers and members of the LGPS were all transferred into the new schemes.
  4. Under the old scheme, some employees still had the right to retire from 60 if they had attained sufficient length of service under Rule of 85 terms.
  5. Information relevant to 2011, prior to the implementation of changes following the Hutton review.
  6. Source: Research by ONS analysts

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Notes for Normal pension age

  1. The 2006 New Police Pension Scheme allows retirement with a full pension after 35 years instead of 30 years under the previous (1987) scheme; benefits and accrual rates are also less generous to members. The 2006 Firefighters’ Pension Scheme makes a number of changes from the previous (1992) scheme, including raising normal retirement 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 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 9: Changes to 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 9 provides estimates on changes to occupational pension scheme rules.
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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