Connected Research

Union policy research in the 21st century

Pension scheme membership – ONS figures

with 16 comments

The Office of National Statistics has today produced figures on the level of membership of occupational pension schemes, using figures drawn from the 2008 annual survey of occupational pension schemes.

The headline figures are that, within the purview of the survey, there are 27.7m members of occupational pension schemes in the UK – though this includes both active and deferred members (in respect of the latter of which there may be some double counting in the figures since an individual may be a deferred member of one scheme and an active member of another) and current pensioners. Of this total, there are some 9m private and public sector employees currently contributing to pension schemes, while there are 8.8m current pensioners and 9.9m people with future entitlements.

(By the way, pension schemes are not so-called Ponzi schemes; i.e. they do not depend on a continual stream of incoming members (and contributions) to pay the pensions of existing pensioners – although ‘mature’ schemes, where the scheme is either closed to new members or where the membership profile is much more towards pensioners than existing members, often find it necessary to adopt much more cautious investment policies, resulting in lower returns).

The survey also reminds us that defined benefit schemes in the private sector have higher contribution rates than do defined contribution schemes: the average total contribution rate (both member and employer) for open defined benefit schemes in 2008 was 19.7 per cent, compared with an average of 9.0 per cent for open defined contribution schemes. Furthermore, the figures also seem to show that the current woes of pension schemes are very much reflective of the times, and that closing schemes is not a money saving measure: closed DB schemes had an average employer contribution rate of 18.1%, compared to 14.6% in open schemes.

There are of course some holes in the figures – the ONS itself points out that the figures exclude those in personal pensions, including group personal pensions (GPPs) and stakeholder pensions. Nigel Stanley over at the TUC has today done a very good job in highlighting this shortcoming in the figures (as well as engaging in some useful agenda setting in terms of how some of the nuances of the figures might otherwise have been reported).

Nigel’s point on the real scandal in the figures being the huge number of private sector workers who are without an occupational pension at all picked up on the central theme of the TUC’s earlier Press Release on the ONS survey. In it, Brendan Barber, General Secretary, went on to comment that the figures pinpointed the correctness of the government’s reforms to the pensions system starting in 2012 in requiring employers to contribute to schemes where employees themselves want it.

This is a different issue to the staged introduction of the employer contribution to personal accounts announced by the DWP and, while it remains disappointing that the regime will take so long to introduce, as I blogged about below, it is good to see something of a fightback against the Tories’ announcement that they would review the reforms. Tim Jones, chief executive of the Personal Accounts Delivery Authority, also came out fairly strongly recently in some unattributed remarks (or otherwise a private interview) picked up by Citywire in which he insisted that the reforms were on track.

Something needs to be done about the large number of people not saving for their retirement: the system of personal accounts is a good start in tackling that culture and there are indeed a lot of myths that need to be busted about personal accounts. If only that lengthy staged introduction could be cut-back…


Written by Calvin

29/10/2009 at 6:14 pm

16 Responses

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  1. The real problem is the state ponzi schemes.

    Just look at the debts there. State pension, state employees, state second pension.

    All with assets of zero. None. Not a sausage. It’s all been spent.

    That’s without the cost of bailing out those with no savings on top.


    13/12/2009 at 2:31 am

  2. Nick,

    As I deliberately said in my original post, pension schemes – even state ones – are not ponzi schemes. This is another of the right’s shibboleths on pensions and, like the others, endless repetition doesn’t make it become true.

    Most public sector schemes are ‘unfunded’, although the largest (the local government scheme) is ‘funded’ so has investment assets along with its liabilities. Even ‘unfunded’ schemes normally feature payments from the sponsoring employer to the governmental department concerned, under the SCAPE system. No private sector scheme could be ‘unfunded’, since there can be no guarantees about its future. There can, on the other hand, be a guarantee of the future of the sponsoring employer in the public sector and there is consequently no need to build up funds with assets and liabilities.

    (By the way, ‘unfunded’ doesn’t mean that no contributions are paid; most public sector schemes ask membership contributions from scheme members.)

    The state pension and S2P are paid from National Insurance contributions, so I don’t understand your point here at all.

    Bailing out those with no savings at all is what the government is trying to do from 2012 with the introduction of personal accounts. Auto enrolment remains a good idea and personal accounts represent a good start in getting people (re-)used to the idea of saving for their retirement via the workplace.

    Finally, here’s a link you might find useful:


    14/12/2009 at 11:19 am

  3. I’m sorry it is a ponzi scheme.

    If we take the state employee costs, its around the 1.15 trillion mark. There are no assets. You can’t flog off speed humps and they generate no income.

    So how big is the deficit for the local authority schemes? There is a deficit, otherwise 20% of council tax wouldn’t be spent on past pension promises.

    What about international accounting standards? Why is the government not adhering to them and publishing the liabilities?

    Unfunded has two meanings, and you’ve picked one of them. Unfunded means that the scheme has no assets because the government spends all the money on other things.

    The state pension and S2P are paid from National Insurance contributions, so I don’t understand your point here at all.

    So why is the government spending more than it raises in income tax on benefits. Doesn’t NI pay for unemployment, the NHS and pensions?

    It’s still unfunded. It’s spent. It’s gone. Children are being born into debt slavery in the UK. If its wrong in the 3rd world, isn’t it wrong here too.

    The state pension and S2P are paid from National Insurance contributions, so I don’t understand your point here at all.

    So put some numbers on it. Lets say I pay 1 pound for an entire state pension, all 120K of it. I’ve paid for it. What’t the problem? Answer, I haven’t paid the cost.

    Bailing out those with no savings costs 320,000 pounds. Can those on minimum wage afford to pay this out of their 2K a year tax bill?

    The TUC is an irrelevance. It doesn’t matter what you wish for. The problem is that this government has a true debt figure around 7-8 trillion. It’s income is 0.5 trillion. It doesn’t add up.

    The end result is no matter what you want, people are going to be screwed.



    14/12/2009 at 12:21 pm

  4. The c. £1tr deficit is of course not a deficit that falls immediately due (BTW, I don’t think that’s the point you’re trying to make): it is amortised over a period of time as people retire, draw pensions and then die, bearing in mind that someone entering the workforce and paying contributions at 20 now is likely still to be drawing a pension in 2080.

    Treasury statistics indicate that the cost of paying public sector pensions is likely to rise to a maximum of 2% of GDP by 2027/28 but rise no further as recent reforms to the benefits structures of public sector schemes, including a rise in the retirement age to 65 for new employees, kick in.

    The net cost of paying ‘unfunded’ public sector pensions (and my definition here was self-evidently the technical one) is c. £4bn in 2009/10. Yet we currently give away twice as much in tax relief to those earning more than £150,000.

    Is cutting back on tax relief at this level something that you would support as a way of mending the deficit in public finances and on improving the positions in retirement of those who are lowly paid?


    14/12/2009 at 2:30 pm

  5. 2% costs 1.15 trillion.

    State pension is 8% according to Turner.

    That means state employee pensions and state pension comes to 5.75 trillion of debts not on the books.

    On tax relief, its a misnomer.

    1. There is no give away. It’s tax deferal.

    2. If you don’t have it, some pensioners will be taxed at 80%.

    The deficit is cause by financial incompentence in government.

    You seem to like redistribution. Should we have a cap on redistribution?

    What’s the cap on the giveaway at retirement? Limited to 100,000 pounds? 250,000 pounds, or should we redistribute more?

    What about those on minimum wage who pay tax? Why are they funding the giveaway?


    14/12/2009 at 2:34 pm

  6. DO you have a reference for your 2% figure of GDP? 28 billion a year in current terms.


    14/12/2009 at 2:38 pm

    • I’m using the TUC document which you disparaged earlier – you can find the full reference there.

      The point is that the cost of pensions does not fall due in one year – and, as the economy grows, is likely therefore to lessen when the figure is more or less a constant in relation to GDP.

      And that’s twice you’ve now quoted the position of those on the minimum wage in relation to affordability – I thought you were in favour of redistribution yourself 😉


      14/12/2009 at 2:47 pm

  7. The current linkage of the state pension is to RPI, longevity (rising), and the retirement age (raised which reduces the cost).

    Don’t forget that Brown has take 5,000 pounds off pensioners by raising the retirement age.

    Nothing like hitting the poor for cash.

    The current linkage of the state employee pensions is to state wage costs (running above GDP), longevitity(rising).

    You’ve haven’t answered the question. Just how much redistribution is needed, to the nearest 100,000 pounds?



    14/12/2009 at 2:51 pm

  8. From the TUC

    Another way of looking at the cost of unfunded public sector pensions is the net
    annual cost — the difference between pensions in payment and the income from
    contributions. This is an affordable £4.1 billion or about 0.3 per cent of GDP for
    the current year.

    So why aren’t public sector workers paying the full cost? They aren’t contributing enough?

    If they are contributing, why is the tax payer paying all their pensions? Surely their contributions have been invested?

    Oh, dear the contributions were spent. It’s a ponzi scheme.

    A least the tax payer has the option. We aren’t bound by the spending promises of past goverments.

    On the 2% figure, there is no reference in the TUC document. How can I check it out?



    14/12/2009 at 2:54 pm

  9. That’s because defined benefit schemes are funded by employers (here, the state) and by employees jointly, with the large part of the costs in relation to future service usually being met by the employer. I can’t see any DB scheme in which the members meet the full cost – except, of course in periods in which there is an employer contribution holiday.

    And the reference in the TUC document is indeed there – do have a good read through.


    14/12/2009 at 3:02 pm

  10. No, the difference is funded versus non-funded.

    Funded schemes mean that the costs fall to the employer/employee in the year that the work was done.

    Unfunded schemes screw the next generation when its the government.

    DB Funded schemes with deficits (BT, BA) will screw the company and the pensioners. Here the government goes a long way to really screw the non-retired member of the scheme.

    So when you talk about redistribution, its my and other children who are the victims of that redistribution


    14/12/2009 at 4:49 pm

  11. On the TUC document again, I see no reference for the 2% figure.


    14/12/2009 at 4:49 pm

    • It’s right there, on p. 16. And it’s Table 4.1 in the source document that you need.


      14/12/2009 at 5:11 pm

  12. Ta for that.

    And in the Treasury paper is this little snippet.

    the sustainable investment rule: public sector net debt as a proportion of
    GDP will be held over the economic cycle at a stable and prudent level.
    Other things being equal, net debt will be maintained below 40 per cent of
    GDP over the economic cycle.

    Do you think the 2% figure is right when they can get this so so wrong?


    14/12/2009 at 5:24 pm

    • Well, the date of the paper might give a clue to that, as well as the caveats in the quotation itself.

      The 2% figure is calculated with reference to a number of (quite legitimate) actuarial assumptions about longevity, inflation, etc. any number of which may turn out to be incorrect. This is the same with calculating the liabilities of any private pension scheme. But do I believe it is a figure in which we can have confidence? – Yes, I do.


      14/12/2009 at 5:31 pm

  13. Well, some of the assumptions have already been shown to be wrong.

    For example, 40% of GDP.

    Now, have you heard of the duck test?


    14/12/2009 at 5:33 pm

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