Occupational Pensions Schemes Survey, UK: 2012

• Total membership of occupational pension schemes (excludes other workplace pensions such as group personal pensions or group stakeholder pensions) with two or more members in 2012 was estimated to be 27.6 million, an increase of 400,000 compared to 2011

• The numbers contributing, or having contributions paid into a scheme (active members), continues to fall. In 2012 there were 7.8 million active members of occupational pension schemes compared to 8.2 million in 2011 and 12.2 million at the peak in 1967

• Approximately 5.1 million active members were in public sector schemes and 2.7 million were in private sector schemes

• For private sector defined benefit schemes, the average contribution rate in 2012 was 4.9% for members (employees) and 15.2% for employers

• For private sector defined contribution schemes, the average contribution rate in 2012 was 3.1% for members (employees) and 6.6% for employers

The Occupational Pension Schemes Survey (OPSS) is an annual survey of occupational pension schemes, and is run by the Office for National Statistics (ONS). The survey was first run in 1953, then in 1956 and 1963, and then every four to five years until 2004 when it became an annual survey. Until its transfer to ONS in 2006, OPSS was run by the Government Actuary’s Department (GAD).

OPSS collects information from occupational pension schemes about scheme membership, benefits and contributions; it includes sections on very small schemes (schemes with 2 to 11 members) and those that are winding up. OPSS covers both private and public sector occupational pension schemes registered in the UK. Results from OPSS provide a detailed view of the nature of occupational pension provision in the UK.

It is important to note that OPSS does not cover other workplace pensions such as group personal pensions or group stakeholder pensions, which are based on individuals entering into a contract with a pension provider; nor does it cover state pensions.

These statistics are particularly useful because, although the UK has a well-established private pension system, there are concerns about funding retirement benefits for an ageing population (see Pension Trends Chapter 2). The Pensions Act 2008, with some amendments in the Pensions Act 2011, put in place a framework for workplace pension reform designed to increase saving for retirement.

Starting in October 2012, with gradual roll-out to all employers by 2018, employers have a duty to automatically enrol all eligible employees into a qualifying pension scheme and to make contributions on their behalf. Workers will be able to opt out of their employer’s scheme if they choose not to participate but, if they are still eligible, they will be re-enrolled after a three year period.

The reference date for the OPSS is 6 April of a given year; as such the process of auto-enrolment does not have a direct impact on the survey results for 2012.

This release provides summary data on membership of schemes and contributions paid. To assist users in their understanding of these data, a glossary of pension definitions are included as part of the background notes of this release.

We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would also be particularly interested in knowing how you make use of these data to inform your work. Please contact us via email: Opss@ons.gov.uk or telephone David Matthews on +44 (0)1633 456756.

Total membership of occupational pension schemes consists of:

• active members (current employees who would normally contribute)
• members receiving pension payments (pensioner members)
• members with preserved pension entitlements (members who are no longer actively contributing into the scheme but have accrued rights that will come into payment at normal pension age)

In 2012 total membership (of schemes with two or more members) was estimated to be 27.6 million compared to 22.2 million in 1991. After a peak of 28.1 million members in 2004 total membership has remained broadly flat at around 27 million.

Membership is evenly distributed over all three membership types:

• Active, 28%
• Pensions in payment, 35%
• Preserved pension entitlements, 37%

It is important to note that individuals may have more than one of these types of membership. For example, an individual may be in receipt of a pension from a former employer but still working and contributing to a pension. This person would appear in both the pensioner and active member category. As such, all estimates of membership are not counts of individuals.

Total estimated membership in 2012 comprised (Figure 1):

• 7.8 million active (employee) members
• 9.5 million pensions in payment
• 10.2 million preserved pension entitlements

Active membership

The active members of an occupational pension scheme are those who, under the rules of the scheme, are currently accruing benefits. They are usually current employees of the sponsoring employer. Estimates of active members can be broken down by the sector that they are in, the structure of the benefit, or the status of the scheme.

Since 1991 there has been a slow, but steady, decline in active membership. In 2012, there were an estimated 7.8 million active members of occupational pension schemes. This is compared to 9.0 million in 2008, 12.2 million in 1967 and 6.2 million in 1953. Some of the drop in active membership of occupational pension schemes can be accounted for by the growth in the number of people contributing to group personal pensions. Personal pensions became available from the late 1980s. The Annual Survey of Hours and Earnings pensions release provides information on pension membership for both occupational and contract based pensions. In 2012, around three-quarters of those employees with workplace pensions had occupational pensions.

Active membership by sector

The decline in active membership has been particularly marked in the private sector. In 2012 there were 2.7 million active members in private sector schemes, compared with 6.5 million in 1991 and 8.1 million at the peak (in 1967).

In the private sector there is a mixture of defined benefit and defined contribution schemes, but in the public sector all occupational pension schemes are defined benefit.

Active membership of public sector schemes has risen over the same period despite the reclassification of some large public sector schemes such as the Post Office and the BBC, to the private sector from 2000. There were an estimated 5.1 million active members in 2012 compared with 4.2 million in 1991 and 3.1 million in 1953 (Figure 2).

Active membership by benefit structure

The decline in the number of active members in the private sector over the last 20 years reflects the fall in active membership of private sector defined benefit schemes. Active membership of such schemes fell to an estimated 1.7 million in 2012 from 3.0 million in 2006.

Active membership of private sector defined contribution schemes has remained around 1.0 million since 2006 (Figure 3).

Active membership by status

An occupational pension scheme may be open, closed, frozen or winding up. An open scheme admits new members. A closed scheme does not admit new members but may continue to receive contributions from or on behalf of existing members who continue to accrue pension rights. In general there are no active members in schemes that are frozen or winding up, as members of such schemes can no longer accrue benefits.

Some schemes have more than one section, offering benefits on different bases to different groups of members. For example, one group of members might be offered benefits on a defined benefit basis, while a second group might be offered benefits on a defined contribution basis. Alternatively, schemes might have different sections in order to offer different levels of the same type of benefit to different members or simply to account for the benefits and contributions of different groups of members separately.

Active membership of open private sector defined benefit scheme sections fell to 0.6 million in 2012 from 1.4 million in 2006 while active membership of open private sector defined contribution scheme sections, has remained at approximately 0.9 million over the same period.

In private sector defined benefit scheme sections only 35% of members were in sections of schemes that were open to new members (‘open schemes’) compared with 91% of members in open private sector defined contribution scheme sections (Figure 4).

Pensioner members by sector

Pensioner members are those who are in receipt of pension payments. The estimates in this section are of the number of pensions in payment from UK occupational pension schemes, rather than estimates of the total number of pensioners in the country receiving benefits from occupational pension schemes. The estimates do not include annuities purchased by members of defined contribution occupational pension schemes on retirement. They do include pensions in payment to dependents and pension credit members and also to those who are still working for the same employer.

Between 2006 and 2012, the total number of occupational pensions in payment rose from 8.2 million to 9.5 million.

There was a steady increase in the total number of occupational pensions in payment between 1953 and 2004, from 0.9 million to 9.0 million. However, the number of occupational pensions in payment fell to 8.2 million in 2006, reflecting a fall in the number of private sector pensions in payment, from a peak of 5.6 million in 2004 to 4.6 million in 2006. In 2012 there were 5.2 million private sector pensions in payment (Figure 5).

Members with preserved pension entitlements by sector

When active employee members leave the employment of the scheme’s sponsoring employer, they usually have a choice of what to do with the benefits accrued in the scheme. The default position for members with more than two years’ service is a preserved pension entitlement, where the rights remain in the scheme and a pension comes into payment at normal pension age. These estimates do not represent the number of individuals with preserved pension entitlements but show the number of preserved pensions. The estimates also include dependents and pension credit members who have a preserved pension entitlement and those still working for the employer (this may occur when an employer stops pension provision or provision on a particular basis).

The total number of preserved pension entitlements rose to 10.2 million in 2012, from 9.8 million in 2011 (Figure 6). The number of members with preserved pension entitlements has risen faster in the public sector than in the private sector. The public sector number tripled to 3.7 million in 2012 from 1.2 million in 1991 (a 206% increase). Whereas the private sector number doubled to 6.5 million in 2012 from 3.3 million in 1991 (a 98% increase).

Contribution rate questions are only asked of those in the private sector. Information on rates in the public sector are available from the Annual Survey of Hours and Earnings (ASHE) and from published individual scheme resource accounts.

Most member and employer contributions are made as a percentage of salary, excluding bonuses. However, fixed amount payments can be made as part of the schedule of normal (or regular) contributions. On the other hand, when schemes make ‘special’ cash payments, for instance as part of deficit reduction, these payments are not considered normal contributions and information on such payments are not collected by the survey.

Private sector defined benefit schemes had higher contribution rates than defined contribution schemes in 2012 (Figure 7), as in previous years:

• for defined benefit schemes, the average contribution rate was 4.9% for members (employees) and 15.2% for employers
• for defined contribution schemes, the average contribution rate was 3.1% for members (employees) and 6.6% for employers
• for career average schemes, the average contribution rate was 5.6% for members (employees) and 12.0% for employers

In private sector ‘career average’ schemes, revaluing in line with prices, average employer contribution rates were lower (at 12.0%) than for defined benefit schemes as a whole. Average member contribution rates in such career average schemes were higher (5.6%).

Part of the difference between defined benefit and defined contribution schemes’ contribution rates relates to differences in contracting out status. Contracting out refers to a statutory arrangement under which pension schemes that meet certain conditions may contract out of the State Second Pension (S2P), formerly the State Earnings - Related Pension Scheme (SERPS). As a consequence, the members’ and National Insurance contributions are reduced or partially rebated. Members of a contracted out pension scheme obtain rights in the pension scheme in place of rights to an additional state pension. From April 2012, the ability to contract out only applies to defined benefit schemes.