From IDS Pensions Bulletin 216, June 2008

Average pensions reach £5,472 pa

Analysis of the most recently available annual reports and accounts published by the trustees of occupational pension schemes shows that the average pension-in-payment has risen to £5,472 pa and the total spending on pensions by these schemes rose by 4.4 per cent. The findings are based on the data provided by 204 schemes with a combined pensioner membership of 2.4 million.

The overall results

The sources of the information are the annual reports and accounts published by the trustees or managers of 204 occupational pension schemes, covering in almost all cases accounting years ending on 31 December 2006, 31 March 2007 or 5 April 2007. This information provides the opportunity to calculate the average annual pension-in-payment over two succeeding years and shows:

• the total expenditure by the scheme on pensions-in-payment rose from £12,574,024,176 to £13, 132,368,778 – a rise of 4.4 per cent
• the number of pensioners (including dependants) in receipt of a pension rose from 2,380,258 to 2,419,167 – a rise of just over one per cent
• the average pension-in-payment rose from £5,304 pa to £5,472 pa – a rise of 3.2 per cent, and
• the average annual pension-in-payment paid by the median scheme in the first of the two years was £4,483 and in the second year was £4,624

The average pension-in-payment data relate almost entirely to benefits paid by defined benefit schemes. With a few exceptions defined contributions schemes do not have pensioner members. Rather, the pension entitlements of active members and deferred pensioners in a defined contribution arrangement are usually secured by the trustee or the scheme member purchasing a lifetime annuity from an insurance company.

Increases in pensioner payrolls

The increasing maturity of defined benefit occupational pension scheme coupled to the lengthening expectations of life would suggest that the number of pensioner members in schemes is increasing year-on-year. And indeed this is the case among 162 of the 204 schemes in this year’s survey.

The reasons for the increase in the pensioner payroll vary. For example in one scheme the large increase, not only in absolute terms but also as a proportion of the previous year’s total number of pensioners/dependants, stems from the merger of two schemes which added 2,948 pensioners to the scheme on 6 April 2006.

What’s in IDS Pensions Bulletin 216