Occupational Pensions Schemes Survey, UK: 2013

Occupational pension provision in the UK, providing summary data on membership of schemes and contributions paid.

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This is an accredited national statistic.

Contact:
Email Hazel Clarke or Fred Norris

Release date:
25 September 2014

Next release:
24 September 2015

1. Key points

  • Total membership of occupational pension schemes with two or more members was estimated to be 27.9 million in 2013, an increase of 300,000 compared with 2012. These estimates exclude participation in other workplace (group personal) pensions.

  • The numbers contributing, or having contributions paid into a scheme (active members), rose slightly from 7.8 million in 2012 to 8.1 million in 2013. There were increases in active membership for both the private and public sector.

  • Contribution rates to defined benefit schemes (having excluded deficit reduction payments) remained higher than for defined contribution schemes.

  • For private sector defined benefit schemes, the average contribution rate was 5.2% of pensionable earnings for members (employees) and 15.4% for employers.

  • For private sector defined contribution schemes, the average contribution rate was 2.9% for members (employees) and 6.1% for employers.

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2. Overview

The Occupational Pension Schemes Survey (OPSS) is an annual survey of occupational pension schemes, run by the Office for National Statistics (ONS). The survey was first undertaken in 1953, then in 1956 and 1963, and then every four to five years until 2004 when it became an annual survey. Until its transfer to ONS in 2006, OPSS was run by the Government Actuary’s Department (GAD).

The OPSS collects information from occupational pension schemes (consisting of two or more members), about scheme membership, benefits and contributions. It includes sections on very small schemes (schemes with 2 to 11 members) and those that are winding up. OPSS covers both private and public sector occupational pension schemes registered in the United Kingdom. Results from OPSS provide a detailed view of the nature of occupational pension provision in the UK.

OPSS does not cover state pensions or personal pensions, the latter being based on individuals entering into a contract with a pension provider. This exclusion extends to 'group' personal arrangements (GPPs, such as stakeholder and self-invested personal pensions), where the contract is facilitated by the employer(s).

ONS are currently exploring options for collecting data on GPPs and would welcome your views.

This bulletin provides summary data on membership of schemes and contributions paid. Further information from the survey is available in the associated reference tables (368 Kb Excel sheet) or on request. To assist users in their understanding of these data, pension definitions are included as part of the background notes of this release (section 3) with further detail in the Pension Trends glossary (198.9 Kb Pdf) .

ONS are always looking to refine the OPSS questionnaires to improve the estimates and capture data that reflects the changing pensions landscape. Some of the time series presented are therefore not directly comparable over time. If this is the case, caveats are included in the footnotes associated with the relevant chart or table.

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3. Workplace pension reforms (automatic enrolment)

Starting in October 2012, with gradual roll-out by 2018, all employers have a duty to automatically enrol eligible employees into a qualifying pension scheme and to make contributions on their behalf. Automatic enrolment is being introduced in stages, based on the size of the employers’ PAYE scheme as of 1 April 2012, commencing with the larger employers. Minimum contribution levels have also been introduced, in a phased process, again with full implementation by 2018.

The reference date for the survey is 6 April of a given year; as such, the 2013 results are the first OPSS estimates to be produced following the introduction of the reforms.

While reference is made to the reforms within this statistical bulletin (in the Active membership and Contribution rate sections), it should be noted that the phased implementation of the reforms was at an early stage at 6 April 2013. Also, the reforms are not happening in isolation and other factors (e.g. employment, disposable household income levels, attitudes to saving for retirement, etc.) would also affect membership and contribution rates1.

Notes for workplace pension reforms (automatic enrolment)

  1. The Department for Work and Pensions have published an evaluation report on the reforms which references various sources.
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4. Your views matter

We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would be particularly interested in knowing how you make use of these data to inform your work. Please contact us via email or telephone Hazel Clarke on +44 (0)1633 455633 or Fred Norris on +44 (0)1633 456109.

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5. Total membership of occupational pension schemes

Total membership of occupational pension schemes consists of active members (current employees who would normally contribute), pensioner members (those receiving pension payments) and members with preserved pension entitlements (members who are no longer actively contributing into the scheme but have accrued rights that will come into payment at some point in the future).

There has been an increase in total membership (of schemes with two or more members) since 1991. In 2013 total membership was estimated to be 27.9 million compared with 22.2 million in 1991 (Figure 1). Since directly comparable records began (2008), there has a been a 200,000 increase in total membership.

Please note that individuals may have more than one of these types of membership. For example, an individual may be in receipt of a pension from a former employer but still working and contributing to a pension. This person would appear in both the pensioner and active member categories. Similarly, an individual might be working and contributing to a scheme while being entitled to a preserved pension from a previous employer’s scheme. This person would appear in both the active and preserved member categories. As such, all estimates of membership are not counts of individuals.

Total estimated membership in 2013 (Figure 1):

  • 8.1 million active (employee) members.

  • 9.6 million pensions in payment.

  • 10.2 million preserved pension entitlements.

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6. Active membership

The active members of an occupational pension scheme are those who are contributing to the scheme, or having contributions made on their behalf. They are usually current employees of the sponsoring employer. This release includes breakdowns of active membership by sector, benefit structure and status.

In 2013, there was a slight increase in active membership to 8.1 million active members following a slow but generally steady decline between 1991 and 2012. Figure 2 shows active membership rose between 2012 and 2013 in both the public (5.1 million to 5.3 million) and private (2.7 million to 2.8 million) sectors. This increase is likely to be due to the establishment of automatic enrolment (discussed within the 'Workplace pension reforms' and 'Background notes' sections).

Some of the drop in active membership of private sector occupational pension schemes in previous years can be accounted for by the growth in the number of employees contributing to group personal pensions. The Annual Survey of Hours and Earnings (ASHE) estimates the proportion of employees currently contributing to both occupational and group personal pensions. According to the 2013 ASHE, less than 1% of employees had a group personal pension in 1997; by 2013 this had risen to nearly 12%.Workplace pensions consist of occupational and group personal pension provision (see Background Notes for definitions). Although OPSS covers only occupational pension provision, members of these schemes accounted for around three-quarters of those with workplace pensions.

Active membership of private sector schemes by benefit structure and status

Active membership of private sector defined benefit (DB) schemes has consistently fallen since 2006, from 3.0 million to an estimated 1.6 million in 2013 (Figure 3). Active membership of open private sector defined benefit scheme sections (those which admitted new members), fell to 0.6 million in 2013 from 1.4 million in 2006 (Figure 4).

Active membership of private sector defined contribution (DC) schemes, which has remained around 1.0 million since 2006 (Figure 3), rose to 1.2 million in 2013 – driven by a rise in membership of open schemes (Figure 4). This is likely to be due to the reforms - DC schemes (along with group personal pensions), were seen as the most likely route for employers to meet their new obligations. This is because, in DB schemes, the employer bears the investment risk and must pay out pensions at the agreed rate, regardless of the returns made on the invested contributions. In contrast, for DC schemes, members bear the risks as there is no promised level of pension payment. DB schemes are therefore potentially less attractive to employers than providing a DC occupational or group personal pension (approaches to risk are discussed in Pension Trends Chapter 6). While employers could use existing, or new, DB schemes for automatic enrolment1, the minimum requirements for a qualifying scheme focussed on DC provision. A further reason DC membership was expected to rise was that the National Employment Savings Trust (NEST) was set up as a DC scheme. NEST is a qualifying pension scheme, established under the Pensions Act 2008, to support the introduction of automatic enrolment. Since the reforms began, various 'master trust' arrangements have also become important players in the pensions market – again with provision typically on a DC basis. Master trusts are where a provider manages a pension scheme for multiple employers under a single trust arrangement (see examples on the National Association of Pension Funds website).

Some schemes have more than one section; offering benefits on different bases to different groups of members (see Background notes –3. Definitions). In private sector defined benefit scheme sections, only 38% of members were in sections of schemes that were open to new members compared with 92% of members in open private sector defined contribution scheme sections (Figure 4).

Notes for active membership

  1. In some ways employers were encouraged to use a DB scheme as their ‘staging date’ (the date by which time they needed to be compliant with the new legislation) was put back to a later date than it would have been had they chosen to meet their obligations through provision of a DC scheme.
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7. Pensioner members by sector (pensions in payment)

Pensioner members are those who are in receipt of pension payments. This section estimates the number of pensions in payment from UK occupational pension schemes in 2013. They include pensions in payment to dependants, pension credit members and those who are still working for the same employer.

These estimates do not represent the total number of pensioners in the country receiving benefits from occupational pension schemes because an individual pensioner may be in receipt of more than one pension. The estimates do not include annuities (or other retirement products), purchased by members of defined contribution occupational pension schemes upon retirement.

While it is not a direct comparison (for reasons mentioned above and that people move between sectors, change employers etc.), the increase in active membership in the 1950s and 1960s (Figure 2) should be broadly reflected in the current pensions in payment figures (Figure 5), as that cohort of employees reaches retirement age. While changes to methodology mean that comparisons over time should be treated with caution, the total number of occupational pensions in payment has risen, from 0.9 million in 1953 to 9.6 million in 2013. Estimates of pensions in payment in the public and private sectors both rose over the period, reaching 4.4 million and 5.2 million respectively in 2013 (Figure 5).

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8. Members with preserved pension entitlements by sector (deferred members)

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’ service1 is a preserved pension entitlement, where the rights remain in the scheme and a pension comes into payment at normal pension age. These estimates do not represent the number of individuals with preserved pension entitlements but show the number of preserved pensions. The estimates also include dependants and pension credit members who have a preserved pension entitlement and those still working for the employer (this may occur when an employer stops provision or changes to a different type).

There was little change in the number of preserved pension entitlements in 2013 compared with 2012 (Figure 6). The total number of preserved pension entitlements was 10.2 million in 2013, with 3.6 million in the public sector and 6.5 million in the private sector.

Future analysis of preserved pension entitlements may be affected by automatic enrolment. For example, if employers close existing schemes and move all their eligible employees to a new scheme based on the automatic enrolment qualifying criteria, these employees will appear in the estimates of both active and preserved members.

Notes for members with preserved pension entitlements by sector (deferred members)

  1. A ‘short service refund’ may be offered for members with less than two years’ service. The period of two years applies to most private sector schemes –although this period may vary e.g. for some in the public sector. In some cases, the benefits accrued may be transferred across to their new employer’s scheme. Information on exits from schemes is provided in the reference tables (368 Kb Excel sheet) - see Table 8.
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9. Contribution rates in private sector occupational pension schemes

Contribution rate questions are only asked of OPSS survey respondents in the private sector. Information on rates in the public sector is not collected as it is already available, e.g. from the Annual Survey of Hours and Earnings (ASHE)1 or from published individual scheme resource accounts.

Most member and employer contributions are made as a percentage of salary, excluding bonuses. However, fixed amount payments can be made as part of the schedule of normal (or regular) contributions. On the other hand, when schemes make ‘special’ cash payments (for example to address a deficit in a defined benefit scheme’s liabilities), these payments are not considered normal contributions and information on such payments are not collected by the survey.

As in previous years (Figure 8), private sector defined benefit schemes had higher contribution rates than defined contribution schemes in 2013 (Figure 7):

  • For defined benefit schemes, the average contribution rate was 5.2% of pensionable earnings for members (employees) and 15.4% for employers.
  • For defined contribution schemes, the average contribution rate was 2.9% for members (employees) and 6.1% for employers.

In private sector 'career average' schemes2, average employer contribution rates were lower than for defined benefit schemes as a whole. In 2013, the rate for career average schemes was 12.0% compared with 15.4% for all DB schemes. Average member contribution rates in career average schemes were fairly similar to the average rate for all DB schemes (5.4% and 5.2% respectively).

Figure 8 shows that, between 2011 and 2013, employer rates for defined benefit schemes have risen slightly, from 14.2% to 15.4% of pensionable earnings. Although deficit reduction payments as single payments are excluded from the estimates, it may be that schemes increase their regular contribution rates in order to minimise deficits and/or the risk of falling into deficit. Pension Protection Fund (PPF) estimates of DB scheme liabilities have increased over the last few years (Table 4.2 of the Purple Book 2013), suggesting schemes may need to consider raising regular contribution rates. Increasing liabilities could be linked to several factors such as ageing population and influenced by the returns on investment in gilts (see Investment by insurance companies, pension funds and trusts and Trends in gilts investment).

As part of the workplace pension reforms, minimum levels for employer and employee contributions will be phased in over the period to 2018 (see Background Notes - 2.Workplace pension reforms). While it is not possible to isolate the effect of these reforms, the fall in average employer contribution rates for defined contribution schemes (6.6% in 2012 to 6.1% in 2013, see Figure 8) may be linked to this policy change as an increase in the number of new members starting on the minimum rates would pull down the average rate. The fall may also be due to employers reducing contributions into existing pensions – referred to as ‘levelling down’. Further analysis of contribution rates, from OPSS and other sources, is produced in Pension Trends Chapter 8: Pension Contributions, an update of this will be available through the Pension Trends release page.

Notes for contribution rates in private sector occupational pension schemes

  1. Please note, definitions of the public sector may vary between different sources.
  2. Career average schemes estimated here refer only to those revalued in line with prices – see Background Notes - 3.Definitions.
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10 .Background notes

  1. General information

    ONS conducts the Occupational Pension Schemes Survey (OPSS) from a sample of public and private sector occupational schemes registered in the UK. The survey presents a range of statistics, including membership of occupational pension schemes, contributions made by employees and employers and benefits provided by schemes. Estimates of membership include breakdowns by type of member and type of scheme.

    The survey does not cover state pensions or personal pensions, the latter being where individuals enter into a contract with a pension provider (usually an insurance company). This exclusion extends to group personal pensions (GPPs) including group stakeholder and group self-invested personal pensions (see Glossary (198.9 Kb Pdf) ).

    ONS are currently exploring options for collecting data on GPPs and would welcome your views.

    The schemes in the survey are selected at random (within membership size bands) from the pension schemes register – a list of all occupational pension schemes in the UK with two or more members that is maintained by The Pensions Regulator.

    Get all the tables for this publication (368 Kb Excel sheet) in the data section of this publication.

    The ONS Data Explorer and Open API are tools from the Office for National Statistics (ONS) enabling users to access, use and customise ONS data more effectively. The Data Explorer makes it easier for users to find, view and download data. The Open API allows data to be used directly by other applications. This enables ONS to meet the Government’s Open Data and Transparency policy.

    The OPSS team have published its most recent data via these new online tools. We provide links to view the dataset via the Dataset Explorer below. Only the key series have been uploaded so far. We would be interested in your views - please email us.

    OPSS Membership Dataset

    OPSS Contribution Rates Dataset

    To learn more about how to access data via the API then please visit the dedicated web pages for the OpenAPI (Beta)

  2. Workplace pension reforms (automatic enrolment)

    Although the UK has a well-established private pension system, there are concerns about funding retirement benefits for an ageing population (see Pension Trends Chapter 2). The Pensions Acts 2008 and 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 were staged in from October 2012, starting with the largest employers. Employees will be able to opt out of their employer’s scheme if they choose not to participate but, if they are still eligible, they will be re-enrolled after a three year period.

    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 £9,440 a year (in 2013/14)
    • works (or usually works) in the UK

    Minimum levels for employer and employee contributions will be phased in over the period to 2018. The minimum contribution levels vary depending upon the scheme’s definition of pensionable pay (see the ‘Certification’ section in the regulator’s guidance for pension schemes under the new employer duties). In the case of a scheme where pensionable pay is equal to qualifying earnings (explained in paragraph 50 of the TPR guidance), the minimum level of contributions are as follows (expressed as a proportion of the jobholder’s qualifying earnings):

    • between October 2012 and September 2017 defined contribution (DC) schemes or personal pensions require a minimum contribution of at least 2%, with at least 1% coming from the employer
    • between October 2017 to September 2018 the minimum contribution will be 5%, with at least 2% coming from the employer
    • from October 2018 it will be 8%, with at least 3% coming from the employer

    The 2013 Annual Survey of Hours and Earnings pensions statistical bulletin gives further information on the workplace pension reforms.

  3. Definitions

    Annuity: A financial instrument provided by an insurance company that pays a guaranteed annual income to the holder, typically until death. The 2014 Budget announced changes which are likely to affect future uptake of annuities.

    Career average scheme: Career Average Revalued Earnings (CARE) or ‘career average’ schemes are a form of defined benefit scheme which use average earnings over the whole career rather than final earnings to calculate the pension. Pension entitlements earned each year are revalued (increased) during the member’s working life in line with prices or earnings.

    Contracting out: This 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). The members’ and National Insurance contributions are reduced or partially rebated. Members of a contracted out pension scheme obtain rights in the pension scheme in place of rights to an additional state pension. From April 2012, the option to contract out only applies to Defined Benefit (DB) schemes. With the introduction of the flat-rate state pension (for those reaching state pension age on or after 6 April 2016), contracting out for DB schemes will also end.

    Defined benefit: A pension in which the rules of the scheme specify the rate of benefits to be paid. Examples include 'final salary' and career average schemes. In a final salary scheme, benefits are based on the number of years of pensionable service, the accrual rate, and the salary in the final year or years prior to retirement.

    Defined contribution: A pension in which the benefits are determined by the contributions paid, the investment return on those contributions (less charges), and the type of retirement income product purchased upon retirement. It is also known as a money purchase pension.

    Group personal pension: An arrangement facilitated by an employer or group of employers for their employees to participate in a personal pension on a group basis. This is a collecting arrangement only; the contract is between the individual and the pension provider, normally an insurance company.

    Membership types: 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 to the pension scheme (or have contributions made on their behalf)
    • Pensioner members are members who are receiving pension payments from the scheme, their dependants and pension credit members (former spouses who have gained rights as a result of a pension credit following pension sharing on divorce). In some cases pensioner members may be in receipt of a pension from the scheme but still be working for the employer
    • Deferred members (those with preserved pension entitlements), are former employees who have accrued rights or assets in the scheme that will come into payment at normal pension age but who are no longer actively contributing (or having contributions paid on their behalf) into the scheme. Deferred members also include dependants, pension credit members and those still working for the employer

    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 entitlements in a previous employer’s scheme. Hence, all estimates of membership in this release are not counts of individuals.

    Occupational pension scheme: An arrangement (other than accident or permanent health insurance) organised by an employer (or on behalf of a group of employers) to provide benefits for employees on their retirement and for their dependants on their death. In the private sector, occupational schemes are trust-based - they are set up as a trust with one or more trustees who have responsibilities to run the scheme according to the scheme rules and ensure members’ benefits are secure. For occupational schemes in the public sector, the same role is performed, for example, in the Local Government Pension Scheme, by a pension committee. Occupational pension schemes are a form of workplace pension.

    Personal pension: An arrangement where the contract to provide contributions in return for retirement benefits is between an individual and an insurance company. Such plans may be taken out by individuals on their own initiative – for example, to provide a primary source of retirement income for the self-employed, or to provide a secondary income to employees who are members of occupational schemes. Alternatively, they may be facilitated by an employer (known as group personal pensions). Personal pensions (which include stakeholder and self-invested personal pensions – see Glossary (198.9 Kb Pdf) ) are a form of defined contribution pension.

    Private sector schemes: Schemes covering the part of the economy consisting of individuals, firms and other institutions. The private sector includes state-owned enterprises and other public corporations with outputs paid for by individuals directly rather than through taxation. The pension schemes of the Lloyds Banking Group, the Royal Bank of Scotland Group and HBOS plc are classified as belonging to the private sector.

    Public sector schemes: Schemes covering the part of the economy that is state-provided, including central and local government, schooling, health and social services, policing and the armed forces.

    Scheme sections: Some schemes have more than one section, offering benefits on various bases to different groups of members. For example, one group of members might be offered benefits on a defined benefit basis, while a second group might be offered benefits on a defined contribution basis. Alternatively, schemes might have different sections in order to offer different levels of the same type of benefit to different members or simply to account for the benefits and contributions of different groups of members separately. The OPSS provides selected schemes with forms to complete for each section separately, further information on data collection is given in the Quality and methodology information (QMI) report (60.4 Kb Pdf) .

    Scheme status: An occupational pension scheme may be open, closed, frozen or in the process of winding up.

    • An open scheme admits new members
    • A closed scheme does not admit new members but may continue to receive contributions from or on behalf of existing members who continue to accrue pension rights
    • Frozen or ‘paid up’ schemes, continue to pay benefits to existing members but no new members are admitted, and no further benefits accrue to existing members (except in DC schemes where the existing pot may continue to accrue investment income). Members can make no more contributions but further employer contributions may be made (and in a DB scheme, may have to be made to correct a deficit)
    • Winding up is where the scheme is in the process of termination, either by buying annuities for the beneficiaries or by transferring assets and liabilities to another scheme or to the Pension Protection Fund. In general there are no active members in schemes that are frozen or winding up, as members of such schemes can no longer accrue benefits

    Further definitions are available in a Glossary (198.9 Kb Pdf) on the ONS website.

  4. Methodology and quality information

    A Quality and Methodology Information (QMI) report (354.5 Kb Pdf) is available. The aims of the QMI report are to provide users with a greater understanding of our statistics, their quality and the methods that are used to create them.

  5. Usage of pension statistics

    The information produced by ONS is designed and produced in consultation with users to ensure that it is relevant and meets users’ needs. An information paper, that outlines some of the different ways members of the public and stakeholders make use of pension statistics and the types of decisions they inform, is available on the ONS website.

  6. Response rates

  7. National Statistics

    The UK Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

    Designation can be broadly interpreted to mean that the statistics:

    • meet identified user needs
    • are well explained and readily accessible
    • are produced according to sound methods
    • are managed impartially and objectively in the public interest

    Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

  8. Social media

    Follow ONS on Twitter and receive up to date information about our statistics.

    Like ONS on Facebook to receive our updates in your newsfeed and to post comments on our page.

  9. Special events

    ONS has published commentary, analysis and policy on 'Special Events' which may affect statistical outputs. For full details visit the Special Events page on the ONS website.

  10. Pre-release access

    A list of those given pre-publication access to the contents of this release is available.

  11. 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.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

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11 . Methodology

Contact details for this Statistical bulletin

Hazel Clarke or Fred Norris
opss@ons.gov.uk
Telephone: +44 (0)1633 455633