Chapter 4: Pension Wealth, 2008/10

Summary

• Only 36 per cent of individuals contributed to a private pension in 2008/10.
• In 2008/10, a much higher proportion of employees in the public sector (82 per cent) belonged to a current occupational pension scheme than their counterparts in the private sector (38 per cent).The median value of current occupational pension wealth of employees in the public sector (£90,100) was more than double than that of employees in the private sector (£40,000).
• In 2008/10, median wealth held in private pensions from which individuals had not yet drawn an income (that is, current and retained pensions) was much higher in defined benefit (DB) pensions (£93,900) than in defined contribution (DC) pensions (£16,000). Some people accumulate wealth in both DB and DC pensions.
• In 2008/10, 18 per cent of individuals received income from a private pension. The median wealth held in pensions that were already being paid (pensions in payment) was £79,400. A higher proportion of men (20 per cent) than women (16 per cent) received such income. The median level of wealth held by men (£126,500) in pensions in payment was more than double than that of women (£60,500).
• Aggregate household private pension wealth in Great Britain increased from £3.7 trillion in 2006/08 to £4.8 trillion in 2008/10. However, around half of this difference (48 per cent) was due to the change in financial assumptions used to calculate current and retained DB pensions and pensions in payment.
• Private pension wealth was unequally distributed with 26 per cent of households in 2008/10 not having any private pension wealth. Of those who had some private pension wealth, the 10 per cent of households with the highest levels of pension wealth had almost seven times as much pension wealth as households in the bottom 50 per cent combined.

Introduction

This chapter looks at estimates of private (non-state) pension wealth in Great Britain from the Wealth and Assets Survey (WAS). It presents new data from the second wave of the survey alongside revised estimates from wave 1.

The information relating to Wave 1, 2006/08, published in this report differs from the information previously published, mainly due to re-imputation. Wave 2 information has been used to improve the assumptions used in the Wave 1 imputation process. See Part 1: Chapter 4, Technical details (545.7 Kb Pdf) .

The chapter begins by first looking at the membership and level of wealth held in current pensions; that is pensions to which individuals were contributing. This information is presented for the different types of pension: occupational defined benefit (DB), occupational defined contribution (DC) and personal pensions (which include group personal and group stakeholder pensions – see section on Concepts and definitions). In addition, estimates of current occupational pension wealth (i.e. DB and DC occupational pension wealth combined) are presented, for the first time, by whether an employee was working in the private or public sector.

The chapter also provides estimates of pension wealth held in retained pensions; these are pensions to which individuals have stopped contributing but from which they are not yet drawing an income. This is followed by analysis comparing, for pensions that have not yet been drawn (i.e. current plus retained), the level of wealth held in DB and DC types of pensions. Estimates of wealth held in pensions from which individuals were receiving an income (i.e. pensions in payment) are also considered.

The chapter closes by bringing the different forms of private pension wealth together to look at wealth in all private pensions, i.e. current (including additional voluntary contributions), retained and pensions in payment. This is shown at the individual level, for households, and for Great Britain as a whole.

The data presented in this chapter is in the form of cross-sectional estimates for wave 1 (July 2006 to June 2008) and wave 2 (June 2008 to July 2010). All estimates of wealth are in nominal terms, (values are not adjusted for inflation). However, some of the estimates require modelling, which has been done using a method developed by the Institute for Fiscal Studies (IFS). The financial assumptions used in the IFS model changed between waves 1 and 2, and this has had an impact on the results (this is explained in more detail in an annex on pension wealth methodology).

Due to the complexity of the data (imputed values, complex weighting etc) no formal significance testing has been undertaken at this stage. No estimates are included which are based on fewer than 30 responding households.

The survey sampled private households in Great Britain. This means that people in residential institutions, such as retirement homes, nursing homes, prisons, and barracks or university halls of residence, and also homeless people are excluded from the scope of the analysis presented in this chapter.

The calculation of pension wealth is complicated. Private pension wealth was split into nine categories and to each a slightly varying valuation method was applied. The nine categories of private pension wealth were: 

• DB occupational pensions to which interviewees were currently contributing,

• DC occupational pensions to which interviewees were currently contributing,

• personal pensions (all DC) to which interviewees were contributing or could have contributed at the time of the interview, including group personal and stakeholder pensions offered by employers,

• additional voluntary contributions (AVCs) to personal pensions (all DC) made by people with DB pensions,

• retained rights in DB pensions,

• retained rights in DC pensions,

• remaining value of pension funds from which people were drawing an income through ‘income drawdown’ (where people take income from the fund but the fund remains invested),

• pensions expected in the future based on the pension contributions of a former spouse or partner,

• pensions already being paid out (‘pensions in payment’).

The pension wealth figures presented here represent a person’s future pension income in retirement, expressed as an equivalent ‘pot of money’. The estimates only include the pension rights accumulated to date; for people who are still working, they do not include rights which may be built up between then and when the person retires.

Wealth from DB pensions (current, retained and pensions in payment) is calculated using financial assumptions (discount rates and annuity factors) which change over time. Wealth from DC pensions is calculated from the reported value of the fund. This is explained in more detail in an annex on pension wealth methodology.

Unlike the other forms of wealth presented in this report, pension wealth is not immediately accessible for most individuals. In most cases the earliest age at which it was possible to receive an income from a registered private pension in 2006/08 was age 50. As a result of the Finance Act 2004 this increased to 55 from April 2010.

The figures in this chapter relate to private pension wealth only, which means state pension wealth is excluded from the analysis. The latter part of the chapter will show that wealth from private pensions is not very evenly distributed as many individuals have zero or very low private pension wealth. As state pension wealth is more evenly distributed, the distribution of total pension wealth (i.e. state plus private) will be less skewed.

Concepts and definitions

• Private pensions are all pensions that are not provided by the state. They comprise occupational and personal pensions, and include pensions of public sector workers.

• Defined benefit (DB) pensions: Pensions in which the rules of the scheme specify the rate of benefits to be paid. The most common DB scheme is a ‘final salary’ scheme in which the benefits are based on the number of years of pensionable service, the accrual rate, and either the final salary, the average of selected years’ salaries, or the best year’s salary within a specified period before retirement. Other types of DB scheme include career average re-valued earnings schemes.

• Defined contribution (DC) pensions: Pensions in which the benefits are determined by the contributions paid into the pension, the investment return on the contributions (which are normally invested in the stock market), and the type of annuity purchased upon retirement. An annuity is a contract between an insurance company and an individual under which the individual pays all or part of their pension fund to the insurance company in return for an agreed regular income for the remainder of their life. DC pensions are also known as money purchase pensions. They can be either occupational or personal. Personal pensions include stakeholder and self invested personal pensions, all forms of DC pension. Personal pensions can be sponsored by an employer (referred to as group personal pensions) or arranged on an individual basis. In this chapter, the definition of occupational does not include any personal pensions.

• Medians and means: The median is the preferred measure of central tendency or ‘average’ in this chapter because many of the data distributions are skewed to the right. This is because a small proportion of individuals have high values of wealth. In unequal distributions, the mean is likely to be influenced by high values, so it does not reflect the experience of most individuals.

Current pension wealth

This section explores the membership and amount of wealth held in private pensions to which individuals in Great Britain were ‘currently’ contributing. It therefore does not include the pensions that an individual may have contributed to in the past but was no longer doing so, or the pensions from which an individual was receiving an income.

Membership of current pensions

This section focuses on the proportion of individuals that were contributing to a pension followed by further analysis on the amounts of wealth held in such pensions. This is important, not only because it allows us to see the proportion of individuals that were not contributing to a private pension, but also because it allows us to estimate the proportion of individuals that contribute to a specific type of pension or, in some cases, to more than one type of pension.

Table 1: Proportion of individuals in Great Britain that currently contribute to a private pension scheme, by pension type and sex (2006/08 and 2008/10)

Great Britain, percentages

Table notes:

1. Source: Wealth and Assets Survey, Office for National Statistics

Table 1 shows that, overall, the majority of people (64 per cent) in Great Britain were not contributing to a private pension in 2008/10. A higher proportion of women (69 per cent) than men (60 per cent) did not contribute to a private pension.

Looking at the types of pension that people did contribute to, Table 1 shows that, in both 2006/08 and 2008/10, a higher proportion of men than of women contributed to either a DC scheme, a Personal Pension or to more than one type of pension. However, in both periods a slightly higher proportion of women than of men contributed to a DB scheme. This may reflect the fact that a larger proportion of public sector workers are women and pension provision in the public sector is predominantly DB.

Current occupational Defined Benefit (DB) pension wealth

Some employers offer their employees the opportunity to join a defined benefit (DB) pension scheme (see Concepts and definitions). Table 2 shows the proportion of individuals in Great Britain that belonged to DB schemes and the wealth those individuals held in these schemes. 

Table 2: Proportion of individuals with wealth in current occupational DB pensions and amount of wealth (£) held in such pensions, by age and sex (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Excludes individuals with zero wealth in current occupational DB schemes
2. .. = suppressed due to low cell count
3. Although the methodology for calculating DB pension wealth has remained the same between the two waves, there have been changes in the financial assumptions. These are detailed in the pension wealth methodology annex.
4. Source: Wealth and Assets Survey, Office for National Statistics

Table 2 shows that between 2006/08 and 2008/10, the overall median current DB pension wealth increased from £82,100 to £100,400. However, almost all (96 per cent) of the increase in this type of pension wealth was explained by changes in the financial assumptions underpinning the calculation for 2008/10, rather than actual changes in the pension rights accrued by members of current DB pensions over the period. The reasons for changing the financial assumptions used in the model for current DB wealth and the impact it has had are explored more fully in the annex on pension wealth methodology.

In both 2006/08 and 2008/10, the median value of men’s current occupational DB pension wealth was generally larger than that of women’s. This lower level of wealth among women reflects the combination of fewer years of membership and the generally lower salaries that are more likely to characterise women’s employment compared to men’s¹.

Table 2 also shows that the median value of current occupational DB pension wealth increased steadily with age. In 2008/10, median current DB pension wealth was £173,800 for individuals who were aged 55 to 64 years old. The proportion of those aged 65 and over with wealth in current DB pensions was negligible.

This is not surprising given the lower employment rates in this age group and that the majority of DB schemes have a normal pension age of either 60 or 65, providing a strong incentive to scheme members to start drawing their income at this point and not later.

Current occupational Defined Contribution (DC) pension wealth

Some employers offer their employees the opportunity to join a defined contribution (DC) pension scheme. In these types of scheme, the income an individual will receive in retirement usually depends on the contributions that have been paid in, the investment return received on those contributions and the annuity rate available at retirement (see Concepts and definitions). Table 3 shows the proportion of individuals in Great Britain that belonged to DC schemes and the wealth those individuals held in these schemes.

Table 3 shows that, overall, the median value of current occupational DC pension wealth increased from £7,500 in 2006/08 to £10,000 in 2008/10. Given that investment returns on DC pension funds would have been heavily affected by the large stock market declines at the peak of the financial crisis in 2008, any increase between the two waves may seem unexpected. The reasons underlying the changes between waves are complex. Part of the explanation could be that the strong recovery in the stock market from mid 2009 onwards² meant that many of the losses were regained. Also, the design of the survey will tend to produce higher estimates in later waves because those already in the survey move on two years and therefore add two years’ contributions and age two years (meaning they are more likely to make higher contributions).

Table 3: Proportion of individuals with wealth in current occupational DC pensions and amount of wealth (£) held in such pensions, by age and sex (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Excludes individuals with zero wealth in current occupational DC schemes
2. .. = suppressed due to low cell count
3. Source: Wealth and Assets Survey, Office for National Statistics

Table 3 also shows that the value of men’s current occupational DC pension wealth was larger than that of women’s in both waves. In 2006/08, the median value of women’s pension wealth (£5,600) was just over half (56 per cent) that for men (£10,000). In 2008/10 the median value for women (£7,800) was around two-thirds (65 per cent) that for men (£12,000).

Current personal pension wealth

All individuals are eligible to make contributions to personal pensions should they choose to do so. This includes individuals not eligible for workplace pensions such as the self-employed, those not currently working and those not offered a pension scheme by their employer.

As explained in the Concepts and definitions section, personal pensions can be purchased from an insurance company by an individual. However, an employer may facilitate the purchase of personal pensions for its employees (known as a group personal/stakeholder pension). Self invested personal pensions (on an individual or group basis) are also included.

As all personal pensions are DC, the income an individual will receive in retirement from such pensions depends on the contributions that have been paid in, the investment return received on those contributions and the annuity rate available at retirement. Table 4 shows the proportion of individuals belonging to personal pensions and the wealth those individuals held in these pensions.

Table 4: Proportion of individuals with wealth in current personal pensions and amount of wealth (£) held in such pensions, by age and sex (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Excludes those with zero pension wealth.
2. .. = suppressed due to low cell counts. Please note that sample sizes for wave 1 in the 16-24 age group are relatively small. Caution should be exercised when interpreting these estimates.
3. Personal pensions include stakeholder and self invested personal pensions, held on a group or individual basis.
4. Source: Wealth and Assets Survey, Office for National Statistics

Table 4 shows that between 2006/08 and 2008/10, overall median current personal pension wealth increased from £14,900 to £17,000. Since current personal pension wealth is affected by the same factors as current occupational DC pension wealth, the increase in median current personal pension wealth over the period is also likely to be explained by additional years of contributions.

In 2008/10, the proportion of men (18 per cent) that were contributing to a personal pension was more than twice the proportion of women (8 per cent). The gap in membership between men and women was lowest in the 25-34 and 65+ age groups. Looking at median current personal pension wealth, in 2008/10, men had a higher overall level of wealth (£20,000) than women (12,500), a difference of £7,500.

Total current pension wealth

Having explored the value of current pensions held in DB or DC schemes or in Personal Pensions, the following section examines the value of total wealth held in all types of current pension. That is, the combined value of all DB, DC and personal pensions to which individuals contributed.

Table 5: Proportion of individuals with wealth in current private pensions and amount of total wealth (£) held in private pensions, by age and sex (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Excludes those with zero pension wealth
2. Source: Wealth and Assets Survey, Office for National Statistics

Table 5 shows that, in both 2006/08 and 2008/10, 35 per cent of the population were contributing to a private pension. The overall median value of current pension wealth has increased from £35,000 in 2006/08 to £43,000 in 2008/10. This reflects the increases that have occurred in the components: in occupational DC and personal pensions this was mainly due to additional years of contributions; and for occupational DB pensions it was related to the impact of changing the financial assumptions between 2006/08 and 2008/10 (see annex on pension wealth methodology).

The proportion of men and women with wealth in occupational DB or DC or personal pensions has remained the same over time. In 2008/10 this was 40 per cent for men, 31 per cent for women.

During the period, median wealth held by individuals in current pensions increased from £40,000 to £45,100 for men and from £30,400 to £40,900 for women. The increase in wealth has been larger for women (£10,500) than for men (£5,100). This means that the gap between the median value of total wealth for men and women has decreased.

Current occupational pension wealth in the public and private sector

A new feature of the data collected in the second wave of WAS is that it allows us to explore differences in occupational pension wealth between those employed in the public and private sector.

Employees were asked whether the firm or organisation that they worked for was a private firm, business or limited company, or some other kind of organisation (such as a university, charity or public limited company). Based on their responses, employees were classified as belonging to either the public sector or private sector, with some employees being classified as “unknown”.

Information on employment in the public or private sector is only available for wave 2; it is presented for the first time in this report.

Table 6 only shows the wealth of those employees currently contributing to occupational pensions, not workplace pensions (which include group personal pensions). It is not possible to split the wealth of those contributing to personal pensions in WAS between those contributing to group personal pensions and those contributing to individual personal pensions.

Table 6: Proportion of employees with wealth in current occupational (DB and DC) pension schemes and amounts of wealth (£) held in such pensions, by age and sector (2008/10)

Great Britain, £

Table notes:

1. Excludes those with zero occupational pension wealth.
2. “All employees” includes cases which were not classified as belonging to either the public or private sector, but still have some occupational pension wealth.
3. ..  = suppressed due to low cell count
4. This table only refers to employees contributing to occupational pension schemes at the time of the interview. It does not include those with personal pensions.
5. Source: Wealth and Assets Survey, Office for National Statistics

Table 6 shows that in 2008/10, a much higher proportion of employees in all age groups in the public sector (82 per cent) belonged to an occupational pension than those in the private sector (38 per cent).

In general, employees in the public sector have more current occupational wealth than their counterparts in the private sector. For example, in 2008/10, the overall median wealth of public sector workers (£90,100) was more than double that of those employed in the private sector (£40,000).

In the public sector, occupational pensions are predominantly DB, schemes which tend to have higher wealth than DC. In the private sector, there is a mix of DB and DC pensions which results in an overall lower level of wealth in the private sector. 

Notes for Current pension wealth

1. Patterns of pay: results of the Annual Survey of Hours and Earnings

2. GDP and the Labour Market

Retained pension wealth

The following section looks at the wealth held by individuals in pensions to which they were no longer contributing but from which they were not yet drawing an income. This will typically be the case when an individual has been a member of their employer’s pension and then left that employer before reaching the age at which they are able to draw an income.

Table 7: Proportion of individuals with wealth in retained pensions and amount of wealth (£) held in such pensions, by age and sex (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Excludes individuals with zero wealth in retained pensions.
2. Retained pension wealth comprises retained occupational DB pensions, retained DC (both occupational and personal) pensions and retained pension for drawdown.
3. .. = suppressed due to low cell count
4. Source: Wealth and Assets Survey, Office for National Statistics

Table 7 shows that the median wealth held by those with retained pensions between 2006/08 and 2008/10 increased from £18,900 to £29,300. For men, median wealth increased from £23,000 to £35,000; while for women, it increased from £14,300 to £24,900. These changes in retained pension wealth are difficult to interpret because of the combination of various factors which affect the estimates. Possible reasons are: 

• changes in the proportion of people reporting retained pensions,

• changes in the composition of retained pension wealth, and 

• changes in the financial assumptions behind the calculation of retained defined benefit pension wealth between 2006/08 and 2008/10 (see annex on pension wealth methodology).

Table 7 also shows that the proportion of individuals with this type of pension wealth increased with age before falling as individuals reached the age at which they were able to cash in their retained rights and draw their pension incomes.

Between 2006/08 and 2008/10, the proportion of individuals with wealth held in retained pensions increased for all age groups. The increase was slightly higher for men (13 per cent to 20 per cent) than for women (9 per cent to 16 per cent). Overall, the proportion of individuals with retained pensions increased from 11 per cent to 18 per cent.

This indicates that a large number of current pensions in 2006/08 were no longer receiving contributions in 2008/10. One possible explanation for this is the impact of the economic downturn, in terms of increases in unemployment and people moving jobs.

Pension wealth in the accumulation phase

This section provides a complete picture of the accumulation phase by bringing together private pension wealth held in current and retained pensions, from both occupational and personal pensions. In other words, the section explores the wealth held by individuals in private pensions from which they were not yet drawing an income.  As private pensions play a crucial part in the savings made for retirement¹, this gives an indication of the level of resources that will be available to individuals during retirement (beyond that which is received from the state).

Table 8 shows the amount of wealth held in private pensions that were not in payment, as well as the proportion of individuals who had such wealth, by the two main types of pension in which individuals could have built up wealth.

An important thing to note when interpreting these results is that DB type pension wealth was modelled in a way that allowed for comparison to be made between DB and DC type pension wealth. This means that the financial assumptions used in the calculation of DB type pension wealth changed between waves, making it harder to interpret changes over time. More information is given in the annex on pension wealth methodology.

Table 8: Proportion of individuals with wealth in pensions that were not yet in payment and amount of wealth (£) held in such pensions, by age and pension type (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Excludes individuals with zero wealth held in pensions not yet in payment.
2. DB type pension wealth comprises current DB and retained rights in DB pensions; while DC type pension wealth comprises current DC occupational pensions, current personal pensions, AVCs, retained rights in DC pensions and retained pensions for drawdown.
3. Please note that sample sizes in the 65+ age group are relatively small. Caution should be exercised when interpreting these estimates.
4. It should be noted that several individuals (9 per cent in wave 2) have wealth in both current and retained pensions. This means that adding proportions of those with current pensions (from Table 3.5) to the proportion of those with retained pensions (Table 3.7) will not result in the overall proportion of individuals with wealth in either current or retained.
5. Source: Wealth and Assets Survey, Office for National Statistics

Focusing on the two main types of private pension, Table 8 shows that in the accumulation phase there was a large difference between the level of wealth held in DB and DC type pensions. In 2008/10, median wealth held in pensions that were not yet in payment was £93,900 for DB type pensions compared with £16,000 for DC type pensions. The biggest differences in median wealth between the two types of pension were in the age groups 45 to 54 years old (where median wealth in 2008/10 in DB was £149,000 and £20,000 in DC) and 55 to 64 years old (where median wealth in 2008/10 in DB was £149,700 and £25,000 in DC).

In both 2006/08 and 2008/10, the proportion of individuals who had wealth held in pensions from which they were not yet drawing an income increased with age, peaking for those in the age group 45 to 54 years old (65 per cent in 2006/08 and 69 per cent in 2008/10).

Between 2006/08 and 2008/10, there was an overall rise in the proportion of individuals with wealth held in pensions that were not yet in payment (41 per cent to 44 per cent), driven by the rise in the proportion of individuals with retained pensions. When looking at the proportions of individuals who had wealth in DB or DC type pensions that were not yet in payment, it should be noted that there was a group of individuals, in both 2006/08 and 2008/10, which had wealth in both types of pension (5 and 9 per cent respectively).

Notes for Pension wealth in the accumulation phase

1. Pension Trends Chapter 10: Saving for retirement

Pension wealth from pensions in payment

The following section complements the previous one by looking at wealth held by individuals in private pensions that were in payment (or receipt). This means that the chapter moves on from showing private pension wealth in the accumulation phase to showing private pension wealth in the decumulation phase. However, it should be noted that it is possible that an individual could be receiving an income from one private pension while still accumulating pension wealth in another.

In WAS, wealth derived from pensions in payment was calculated by asking people how much private pension income they receive and then working out how much would be needed to purchase this pension (in the form of an annuity) for the remainder of their lives. Therefore, those in older age groups (with fewer years of life remaining), have lower levels of wealth than those in younger age groups. The calculation of the ‘pot’ requires assumptions to be made about annuity rates, and these may change over time (see annex on pension wealth methodology).

Table 9 shows estimates for the proportion of individuals who were receiving any income from a private pension and the value of this wealth. This includes private pensions received from a former spouse. Since very few people under the age of 50 received any income from private pensions, the age categories shown in Table 9 are different from those shown in previous tables in order to focus on the distribution of pensions in payment wealth within the older population.

Table 9 shows that in 2008/10 the overall median wealth held in pensions in payment was £90,500, compared with £79,400 in 2006/08. Around two-thirds of this difference is due to the change in financial assumptions (see the annex on pension wealth methodology). For all individuals, the proportion receiving income from private pensions remained unchanged between 2006/08 and 2008/10.

Table 9: Proportion of individuals with wealth in pensions in payment and amount of wealth held in such pensions: by age and sex, (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Excludes individuals with zero wealth in pensions in payment.
2. Pension in payment wealth comprises private pensions from which individuals were receiving an income (including spouse pensions).
3. Source: Wealth and Assets Survey, Office for National Statistics

For men the median wealth held in pensions in payment (£126,500) in 2008/10 was more than double that of women (£60,500). The proportion who received income from a private pension was also higher for men (20 per cent) compared to women (16 per cent). In some age groups the proportion was much higher; for instance approximately three quarters of men in age groups aged over 65 received some income from private pensions, compared with around half of women in those age groups.

Total private pension wealth

In the following section, the various sources of private pension wealth, current (including AVCs), retained and pensions in payment, are drawn together. This allows us to summarise the level of total private pension wealth among individuals and households in Great Britain by certain key characteristics.

Total wealth held in private pensions (individual level)

Table 10 shows total private pension wealth held by individuals and by the proportion of individuals with any private pension wealth by age and sex.

Table 10: Proportion of individuals with wealth in private pensions and amount of wealth (£) held in such pensions: by age and sex (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Includes those with zero private pension wealth (i.e. includes everyone regardless of whether they have private pension wealth or not).
2. Excludes those with zero private pension wealth (i.e. only includes those with private pension wealth).

3. Source: Wealth and Assets Survey, Office for National Statistics

Table 10 shows that a similar proportion of individuals have any private pension wealth in the two waves (56 per cent and 58 per cent in waves 1 and 2 respectively). The median value of this pension wealth (excluding those with zero private pension wealth) has increased from £50,400 (in 2006/08) to £64,400 (in 2008/10). Considering all individuals, including those with zero private pension wealth, the median wealth in private pensions has increased from £4,300 to £9,100.

In both periods, a higher proportion of men than women have any pension wealth (in 2008/10, 64 per cent of men and 53 per cent of women had any pension wealth). Overall, the median value of men’s total pension wealth is higher (£79,000 for men compared with £51,200 for women in 2008/10 - excluding those with zero pension wealth).

Table 10 shows that membership and (to a lesser extent) wealth is broadly similar in younger age groups, however the difference becomes more pronounced as age increases. There are two likely reasons for this. Firstly, a much lower proportion of young people have any pension wealth at all and those that do are likely to be in similar positions, regardless of gender. Secondly, men and women are likely to have differing career paths, influenced for example by caring responsibilities. Historically, women were also less likely to be eligible to join pension schemes, affecting the wealth of women in older age groups.

Total wealth held in private pensions (households)

The remainder of this section presents estimates of wealth at the household rather than individual level. Household wealth was calculated as the sum of private pension wealth across all adults within the household.

In many cases, couples may have made joint provision for retirement. For example, if one partner worked and the other did not, the working partner may have contributed additional amounts to his or her private pension to ensure the final income would be sufficient to support both partners during retirement. Therefore, it makes sense to examine total private pension wealth held by all members of the household to supplement the individual picture presented in the previous section. Additionally, it allows us to make comparisons of pension wealth with the other types of wealth reported at household level (see Total Wealth chapter).

Table 11 allows us to compare the pension wealth of households in Great Britain with private pensions against all households (including those with no private pension wealth) in Great Britain. It also shows the wealth of households with private pensions by type of pension wealth.

Table 11: Proportion of households with wealth in private pensions and amount of wealth held in such pensions: by type (2006/08 and 2008/10)

Great Britain, £

Table notes:

1. Calculations for wealth estimates exclude households with zero pension wealth (i.e. only cover households with pensions).
2. The rows highlighted in bold and labelled ‘Total pension wealth (whole population)’ include households with zero pension wealth.
3. Although the methodology for calculating DB pension wealth has remained the same between the two waves, there have been changes in the financial assumptions. The impact on the estimates (at individual level rather than household level) is shown in the pension wealth methodology annex.
4. Source: Wealth and Assets Survey, Office for National Statistics.

Firstly, looking at the whole population (that is a combination of households that have either some or no private pension savings); Table 11 shows that between 2006/08 and 2008/10 the mean pension wealth of all households increased from £147,500 to £193,600. However, the median pension wealth of all households increased from £32,700 in 2006/08 to £52,500 in 2008/10.

Secondly, looking just at those households that have some private pension wealth; Table 11 shows that between 2006/08 and 2008/10 the mean pension wealth of households increased from £202,600 to £255,100. However, the median pension wealth of households rose from £79,500 in 2006/08 to £101,800 in 2008/10.

Aggregate household private pension wealth

Table 12 presents a breakdown of aggregate private pension wealth of households in Great Britain by the overall components discussed in the previous sections.

Table 12: Breakdown of aggregate household private pension wealth: by components (2006/08 and 2008/10)

Great Britain, £million

Table notes:

1. Current pension wealth comprises current occupational DB and DC pensions, and current personal pensions (including group personal/stakeholder pensions).
2. Retained pension wealth comprises retained occupational DB pensions, retained DC (both occupational and personal) pensions and retained pensions for drawdown.
3. Pension in payment wealth comprises private pensions from which individuals were receiving an income (including spouse pensions).
4. Although the methodology for calculating current and retained DB pension wealth and pensions in payment has remained the same between the two waves, there have been changes in the financial assumptions. These are detailed in the pension wealth methodology annex.
5. Source: Wealth and Assets Survey, Office for National Statistics

Table 12 shows that aggregate private pension wealth in Great Britain increased from £3.7 trillion in 2006/08 to £4.8 trillion in 2008/10. This was as a result of increases in all of the components of aggregate pension wealth, including retained pension wealth which almost doubled over the period.

The largest components of aggregate pension wealth in 2008/10 were current pension wealth and pension in payment wealth (both 41 per cent). In 2006/08, current wealth was the largest component (45 per cent) followed by pension in payment wealth (43 per cent).

Although the methodology for calculating current and retained DB pension wealth and pensions in payment has remained the same between the two waves, there have been changes in the financial assumptions which have affected the estimates of aggregate wealth. Around half (48 per cent) of the difference between the aggregate wealth in waves 1 and 2 was due to the change in financial assumptions. More information is given in the annex on pension wealth methodology. 

When looking at these aggregate household figures, it should be noted that many households in Great Britain had no private pension wealth (27 per cent in 2006/08 and 24 per cent in 2008/10 derived from Table 11). This shows how unequally this type of wealth was distributed. To examine the distribution of aggregate private pension wealth more fully, it is interesting to look at the distribution of aggregate pension wealth among only the households who had any private pension wealth (76 per cent in 2008/10).

Figure 13 shows aggregate private pension wealth for those with some private pension wealth by deciles. Deciles divide the data, sorted in ascending order, into ten equal parts so that each part represents 10 per cent of the wealth distribution – from households with the least wealth in the 1st decile to households with the most wealth in the 10th decile.

In 2008/10, looking at aggregate private pension wealth among only those who had any private pension wealth, the 10 per cent of households with the most pension wealth (those in the 10th decile) had just under three times as much as the 10 per cent with the second highest amount of pension wealth (9th decile), and just under 7 times as much as households in the bottom five deciles combined. The aggregate pension wealth of the bottom five deciles was £361 billion, accounting for only 8 per cent of total private pension wealth.

Figure 13: Breakdown of aggregate household private pension wealth for only those with any private pension wealth: by deciles 2008/10

Great Britain, £ million

Notes:

1. Excludes households with zero pension wealth.
2. Source: Wealth and Assets Survey, Office for National Statistics

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Focusing on the composition of aggregate pension wealth among only those households who had any private pension wealth, current pension wealth made the largest contribution to aggregate pension wealth from the 1st to the 9th decile. In the 10th decile, the largest contributor was pension in payment wealth. The contribution of retained pension wealth to aggregate pension wealth continuously decreased from the 1st to the 10th decile.

Distribution of private pension wealth by region

Table 14 looks at the proportions of households with private pension wealth across the regions and countries of Great Britain. In 2008/10, 76 per cent of households in England had at least some private pension wealth. This compares with 76 per cent of households in Wales and 72 per cent of households in Scotland and is an increase for all countries since 2006/08.

In both 2006/08 and 2008/10, the region with the lowest proportion of households with some pension wealth was London (63 per cent and 70 per cent respectively), while the South East contained the highest proportion of households with some pension wealth (79 per cent and 82 per cent respectively).

Table 14 also shows the distribution of household pension wealth for all households (excluding those with zero pension wealth). The amount of pension wealth is fairly similar across the countries of Great Britain. In 2008/10, England had the highest median value for total household pension wealth (£102,300), followed by Scotland (£101,000) and Wales (£98,200). Between the English regions there is more variation, the South East had the highest median value for total household pension wealth (£120,500), whilst Yorkshire and the Humber and the North East had the lowest (£91,900 and £92,100 respectively).

Table 14: Distribution of household private pension wealth: by region (2006/08 to 2008/10)

Great Britain, £

Table notes:

1. Excludes those with zero pension wealth.
2. Source: Wealth and Assets Survey, Office for National Statistics

Distribution of household private pension wealth by household type

Table 15 shows the distribution of household private pension wealth for different types of household, along with the proportion of households in each category with at least some private pension wealth.

In 2008/10, the household type (with some pension wealth) with the highest median private pension wealth was couples where one individual was aged under and the other over the State Pension Age, with no dependent children (£272,800). This was also the household type with the highest mean private pension wealth (£533,100). In general, household types where there were couples (with or without children), tended to have more pension wealth than households where there was a single adult. This result is to be expected as couples will need to accumulate pension wealth that will provide for both partners’ retirement.

Looking at the proportion of households with some pension wealth, this was the lowest for households with a “lone parent and dependent children” (44 per cent in 2008/10). The median pension wealth for this household type was £36,800. In contrast, for couple households, a high proportion of households had some pension wealth, highest in the category “married/cohabiting, non-dependent children only” (91 per cent). The median pension wealth for this household type was £204,300.

Table 15: Distribution of household private pension wealth: by household type (2006/08 to 2008/10)

Great Britain, £

Table notes:

1. Excludes those with zero pension wealth.
2. SPA= State pension age, 60 for women and 65 for men at the time of both waves.
3. Source: Wealth and Assets Survey, Office for National Statistics

Conclusion

This chapter examined private (non-state) pension wealth estimates from the Wealth and Assets Survey in 2006/08 and 2008/10. The chapter showed that there was a wide variation in the amount of private pension wealth held by characteristics such as age and sex. However, much of the variation in age was to be expected as individuals accumulate private pension wealth over their working lives and then it gradually diminishes through drawing an income during retirement.

Aggregate household private pension wealth in Great Britain increased from £3.7 trillion in 2006/08 to £4.8 trillion in 2008/10. However, around half of this difference (48 per cent) was due to the change in financial assumptions used to calculate current and retained DB pensions and pensions in payment.

The distribution of private pension wealth in Great Britain remained unequal; a large proportion of households did not have any private pension wealth (24 per cent in 2008/10), and for those who did, the top 10 per cent of households with such wealth had just under seven times more (in 2008/10) than the wealth of the bottom 50 per cent of individuals combined.

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

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