The number of active members in private workplace pension plans in the United Kingdom fell to a record low of 2.9 million in 2011, increasing fears of a looming national pension crisis.
This private membership decline is the biggest one since 1953, when recordkeeping began and private sector membership was 3.1 million, according to the U.K.’s Office for National Statistics (ONS). The peak was in 1967, when more than eight million employees in the private sector had company pensions.
The ONS partially attributes this dramatic decrease to the fact that DB plans have become more scarce over the years. Membership in those plans fell from 34% in 1997 to just 8% in 2012. The DC decline was significantly less sharp—from 11% to 9% over the same period.
The ONS statistics also reveal a quantity difference between these two types of pension plans. On the DB side, the average contribution rate is 19.2% of payroll; for DC plans, it’s just 9.4%.
While employees in Britain’s private sector have had less access to a company pension plan, the public sector has seen the reverse trend. Plan membership among public workers has actually been growing—it rose to 5.3 million people in 2011, up from 4.1 million in 1995. This is despite the fact that major public plans, such as the British Broadcasting Corp., have moved to the private sector.
The ONS data also show that people with high earnings are more likely to be members of a pension plan than low-income individuals.
The figures reveal variations across industries, too. The ones who are most likely to have a work pension plan are those working in public office, defence and social security. Employees in the accommodation and food services are least likely to be members of a workplace pension plan.
Individuals who are their own bosses are also particularly vulnerable. In 2011, only 34% of self-employed men belonged to a personal pension, the lowest percentage since the beginning of the 1990s. The ONS figures do not include information about self-employed women’s access to pension plans.
When it comes to age, people in their 40s and 50s are most likely to be members of workplace pension plans. The lowest membership occurs at the beginning and end of people’s working lives.
The bleak ONS numbers have increased fears that the U.K. is heading for a national pension catastrophe, with a growing gap between rich and poor retirees.
Observers are also concerned that Britons are not putting aside nearly enough for their golden years, so many of them will have to work into their 70s. And those who do save often do not get the most of their savings when they try to convert them into retirement income, say experts.
Workplace pension plans in the U.K. do not include employer-sponsored (group) personal pensions because they are essentially contracts between an individual and an insurance company—even though they are facilitated by an employer. Group personal pensions in the U.K. have actually seen a rise in membership since they were created in the late 1980s and early 1990s.
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