David Prosser: Shock pension news: there is no crisis
Thursday 29 October 2009
Outlook Good news and bad for the future financial security of those currently in work. Official figures show that more people are putting money into occupational pension schemes – despite what you may have heard about their demise – but also that they are saving less than they once did.
Overall, the Office for National Statistics says, nine million people are now active members of occupational pension schemes, up from 8.8 million a year ago. But less than a third of these savers are now members of final salary schemes, with the rest in defined contribution plans.
Either way, employees themselves contribute broadly similar sums. But employers' contributions are markedly different, the ONS says. Typically, employers pay around 15 per cent of pay into final salary plans, but only six per cent into defined contribution schemes.
As a result, while more people reaching retirement age in the future will have some private pension income on which to rely, the majority will be significantly worse off than those who have retired on final salary benefits. Some may even still qualify for top-up pension benefits from the State's means-tested system.
Nevertheless, the ONS's data suggests that pension provision is not suffering the crisis one might think given the collapse of so many final salary plans. With auto-enrolment on the way in 2012, there is a decent base on which to build much wider participation in saving for old age in the future.
The figures also suggest that members of public sector pension schemes, which now account for an even greater proportion of the final salary plans still open, will find it even tougher to defend the more generous benefits they receive.
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