Pension scheme membership falls again

Trade union members protest outside a High Court hearing over the use of CPI to uprate pensions instead of RPI Trade unionists protest outside a High Court hearing this week over the inflation proofing of their pensions

The number of people paying into occupational pension schemes has fallen again to just 8.3 million.

The Office for National Statistics (ONS) said this was a further drop from 8.7 million in 2009 and the lowest level since the mid-1950s.

Last year, public sector schemes had 5.3 million active members and private sector schemes had three million.

The ONS said the decline was due to the continuing closure of final-salary schemes run by private firms.

"The decline in active membership in the private sector since 1991 reflects the fall in active membership of private sector defined benefit schemes," the ONS said.

Joanne Segars, National Association of Pension Funds chief executive, said: "It's astonishing that pension uptake has slumped to such a low level, and with a greying population living longer and longer, it's the last thing our society needs."

"Landmark reforms to auto-enrol all workers into a pension from next year will make a big difference."

The new law means that employers must automatically enrol their staff into either the recently launched, state-sponsored, NEST scheme, or a company scheme of equivalent value.

Still falling

Between 2009 and 2010, the active membership of public sector schemes fell by just 100,000 to 5.3 million.

But for private sector schemes, active membership dropped by 300,000 to three million.

All of that was due to a fall in membership of defined benefits (DB) schemes (mainly the final-salary variety) while membership of defined contribution (DC) schemes was steady at 1 million.

DC schemes are ones in which the value of the eventual pension depends directly on the investment returns made by the scheme and the size of pension that can be bought with a lump sum at retirement.

Closing down

Although private sector pension membership peaked in 1967 at 8.1 million, the bulk of the subsequent decline has taken place in the past 20 years.

The main reason is that employers have sought to cut the rising cost of their schemes by closing them to new joiners and, increasingly, existing members as well.

In 1991 private sector schemes still had 6.5 million members paying in, but that number has now more than halved.

By contrast, public sector pension scheme membership has increased from the 4.2 million contributing members recorded 20 years ago, and is just below the record level of 5.5 million contributors recorded in 1979.

Paul Jayson of actuaries Barnett Waddingham said the latest figures showed the UK's pension system was crumbling.

"Commercial and other pressures have led companies to cut back their spend on providing 'gold plated' defined benefit pensions due to rising costs and increased compliance and governance duties, whereas these pressures have not had the same effect in the public sector where costs are met from tax revenues," he said.


The ONS survey highlights once again the comparatively poor deal provided by DC schemes, with both members and employers paying in much less than their counterparts still in DB schemes.

In 2010 the average contribution rate for DB schemes was 5.1% of earnings from staff and 15.8% from employers, making 20.9% altogether.

In DC schemes the total average contribution rate was just 8.9%, with 2.7% coming from employees and 6.2% from employers.

These figures were less than in 2009, when both employers and employees paid in a bigger percentage of salaries, with 21.7% going into DB schemes that year and 9.3% going into DC schemes.

The figures have been published in the Occupational Pension Scheme Survey for 2010.

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