Table of contents
1. Overview
Headline results from the 2013 Occupational Pension Schemes Survey (OPSS) were released in September 2014. This article looks at membership and contribution rates for private sector defined benefit (DB) schemes which are contracted out of the additional state pension. Public sector schemes are not included as they are almost all contracted out. Defined contribution (DC) schemes are excluded as contracting out for DC schemes ended in April 2012.
If an occupational scheme is contracted out, it means that there is a statutory arrangement under which, if it meets certain conditions, it is permitted to not participate in the additional state pension (the State Second Pension or S2P, formerly known as the State Earnings Related Pension Scheme). Members’ and employers’ National Insurance contributions are then reduced or partially rebated. Members of a contracted out pension scheme obtain rights in the pension scheme in place of additional, earnings-related benefits under the state scheme.
Under the Pensions Act 2014, contracting out will end for DB schemes from April 2016. DB schemes have been able to contract out since 1978. DC schemes had been able to contract out since 1988, but this ended in April 2012.
Historic data, including information for defined contribution schemes, can be found in the 2011 OPSS Annual Report and the previous edition of this story. In addition to the data underlying the charts and tables shown in this article, the reference tables (116.5 Kb Excel sheet) for this release also include estimates for the number of schemes, preserved members and pensioner members by contracted out status.
A glossary (198.9 Kb Pdf) explaining some of the key pension terms is available on the ONS website.
Back to table of contents2. Active membership and contracting out
Figure 1 shows the number of active members in private sector defined benefit occupational schemes by contracted out status. Active (employee) members are those currently contributing, or having contributions made on their behalf.
In 2008, 91% of active members of private sector defined benefit (DB) schemes were in contracted out schemes, falling to 80% in 2013. Over the same period, the number of contracted out active members in private sector DB schemes fell from 2.4 million to 1.3 million.
Figure 1. Active membership of private sector defined benefit occupational pension schemes: by contracted out status, 2008 to 2013 (UK, millions)
Source: Occupational Pension Scheme Survey (OPSS) - Office for National Statistics
Notes:
- Schemes with 2 or more members where contracted out status is known
- Active membership refers to those currently contributing or having contributions made on their behalf
- The underlying figures for this chart, along with estimates for the proportion of active members contracted out, are available in the chart download
- The reference tables for this release (see ‘Data in this release’) also include estimates for preserved and pensioner membership
Download this chart Figure 1. Active membership of private sector defined benefit occupational pension schemes: by contracted out status, 2008 to 2013 (UK, millions)
Image .csv .xls
Table 1: Active membership of private sector defined benefit occupational pension schemes: by size and contracted out status, 2013 (UK)
| Scheme size | Number of active members (millions) | Percentage of active members in contracted out schemes (%) | ||
| Contracted out | Not contracted out | Total | ||
| 10,000 + | 1 | 0.2 | 1.2 | 80 |
| 5,000 to 9,999 | 0.1 | 0 | 0.1 | 89 |
| 1,000 to 4,999 | 0.2 | 0.1 | 0.2 | 74 |
| 100 to 999 | 0.1 | 0 | 0.1 | 89 |
| 12 to 99 | 0 | 0 | 0 | 87 |
| Total | 1.3 | 0.3 | 1.6 | 80 |
| Source: Office for National Statistics | ||||
| Notes: | ||||
| 1. Percentages are based on unrounded numbers and calculated as a proportion of members where contracting out status is known. | ||||
| 2. Size refers to the total membership of the scheme (active plus preserved plus pensioner membership). | ||||
| 3. Schemes with 12 or more members. | ||||
| 4. The reference tables for this release also include estimates for preserved and pensioner membership. | ||||
Download this table Table 1: Active membership of private sector defined benefit occupational pension schemes: by size and contracted out status, 2013 (UK)
.xls (28.2 kB)3. Contribution rates
Tables 2 and 3 show the numbers and percentages of active members of private sector defined benefit (DB) occupational schemes, by contribution rate bands and contracted out status. Table 2 shows employee contribution rates; Table 3, employer contribution rates.
In general, as would be expected given the design of the system (see Overview), those contracted out were more likely to be contributing higher amounts. The weighted average contribution rate (employee + employer) for contracted out schemes was 22% compared with 15% for non-contracted out schemes.
Table 2: Active membership of private sector defined benefit occupational pension schemes: by employee contribution rate and contracted out status, 2013 (UK)
| Number of active members (millions) | Percentage of active members in contracted out schemes (%) | |||
| Contracted out | Not contracted out | Total | ||
| Contributory | 1.1 | 0.2 | 1.3 | 83 |
| Less than 3% | 0 | 0 | 0 | 54 |
| 3% to under 4% | 0 | 0.1 | 0.1 | 25 |
| 4% to under 5% | 0 | 0 | 0.1 | 58 |
| 5% to under 6% | 0.3 | 0 | 0.4 | 96 |
| 6% to under 7% | 0.2 | 0 | 0.2 | 83 |
| 7% and over | 0.5 | 0.1 | 0.6 | 88 |
| Non contributory or fixed amount | 0.1 | 0.1 | 0.2 | 62 |
| Total | 1.3 | 0.3 | 1.6 | 80 |
| Source: Office for National Statistics | ||||
| Notes: | ||||
| 1. Totals include members in schemes where the contribution rates are unknown. | ||||
| 2. Percentages are based on unrounded numbers and calculated as a proportion of the total excluding members in schemes where the contribution rates are unknown. | ||||
| 3. Size refers to the total membership of the scheme (active plus preserved plus pensioner membership). | ||||
| 4. Schemes with 12 or more members. | ||||
| 5. Active membership refers to those currently contributing or having contributions made on their behalf. | ||||
Download this table Table 2: Active membership of private sector defined benefit occupational pension schemes: by employee contribution rate and contracted out status, 2013 (UK)
.xls (28.7 kB)
Table 3: Active membership of private sector defined benefit occupational pension schemes: by employer contribution rate and contracted out status, 2013 (UK)
| Number of active members (millions) | Percentage of active members in contracted out schemes (%) | |||
| Contracted out | Not contracted out | Total | ||
| Contributory | 1.2 | 0.3 | 1.5 | 81 |
| Under 10% | 0.1 | 0.1 | 0.1 | 41 |
| 10% to under 12% | 0.3 | 0 | 0.3 | 94 |
| 12% to under 15% | 0.2 | 0.1 | 0.3 | 59 |
| 15% to under 20% | 0.3 | 0 | 0.4 | 93 |
| 20% and over | 0.3 | 0 | 0.4 | 91 |
| Non contributory or fixed amount | 0.1 | 0 | 0.1 | 72 |
| Total | 1.3 | 0.3 | 1.6 | 80 |
| Source: Office for National Statistics | ||||
| Notes: | ||||
| 1. Totals include members in schemes where the contribution rates are unknown. | ||||
| 2. Percentages are based on unrounded numbers and calculated as a proportion of the total excluding members in schemes where the contribution rates are unknown. | ||||
| 3. Size refers to the total membership of the scheme (active plus preserved plus pensioner membership). | ||||
| 4. Schemes with 12 or more members. | ||||
| 5. Active membership refers to those currently contributing or having contributions made on their behalf. | ||||