From IDS Pensions Bulletin 210, November 2007

ONS survey shows schemes in decline

In October 2007 the Office of National Statistics published the 2006 edition of its Occupational Pension Schemes Annual Report. This survey shows that there is a growing difference between the pension contributions being paid to DB and DC schemes. Also, as more DB schemes in the private sector close to new members, there has been a decline in private sector scheme membership in general, although the number of active members in public sector schemes has increased.

Overview of UK occupational schemes

The Occupational Pension Schemes Survey (OPSS) 2006 reports that overall there were approximately 66,400 private sector occupational pension schemes in the UK in that year including:

• schemes in the process of winding up (5.8 per cent)
• frozen schemes with no further build up of pension rights for any member (7.9 per cent)
• schemes closed to new entrants (30.1 per cent), and
• schemes open to new entrants (56.3 per cent).

Of these, only 12,820 schemes (nearly one fifth of the total) had 12 or more members. Looking just at those schemes with at least 100 members, among the 1,850 occupational pension schemes still open to new entrants, 1,130 (61 per cent) were defined benefit schemes (including hybrids) and 720 (39 per cent) were defined contribution schemes.

Contribution rates

Between 2004 and 2006, member plus employer contribution rates to opendefined benefit schemes in the private sector increased from 16.8 per cent to 19.2 per cent but there had been little change for open defined contribution schemes. In respect of employer contribution rates to closed private sector schemes, OPSS 2006 found that for defined benefit schemes they had fallen from 18.8 per cent in 2005 to 15 per cent in 2006 and for closed defined contribution schemes contribution schemes, they had fallen from 8.0 per cent in 2005 to just 5.4 per cent in 2006.

Membership

Figures showed that the number of active members in private sector occupational pension schemes has fallen, but has risen in the public sector. In 2006 the OPSS estimated that there were 9.6 million active members of occupational pension schemes of whom 4.4 million were in the private sector, compared with 6.5 million in 1991 and 8.1 million at the peak in 1967. This reflects the fall in active membership in DB schemes, which has fallen from 5.6 million in 1991 to 3.3 million in 2006. In contrast, active membership of public sector schemes has risen from 4.2 million in 1991 to 5.1 million in 2006.

What’s in IDS Pensions Bulletin 210