More people save into defined contribution (DC) pension schemes than defined benefit (DB) pension plans in the UK, according to figures by the Office for National Statistics.
Its Pension trends, chapter 10: saving for retirement, 2013 edition showed that in 2008/2010, for UK households with pension savings, 46% saved into a DC pension scheme while 41% saved into a DB pension scheme.
This is in contrast to previous years. For example, the ONS’ revised Wealth and assets survey, published in December 2009, estimated the proportions of people with DB and DC pension savings were 41% and 46%, respectively, during the period between July 2006 to June 2008.
In 2008/2010, median DB pension saving for households stood at £177,900, much higher than the equivalent £29,000 for DC pensions. In 2006/2008, the median private pension saving for DB and DC schemes was £162,600 and £23,200, respectively.
The figures also showed:
- In 2008/2010, pensions saving contributed 79% towards the total aggregate saving of households that were headed by someone who was aged between 50 and 64.
- Among the 50 to 64 age group by saving deciles, those in the top decile (who have the most savings) have around eight times as much as the bottom five deciles combined (who have the least).
- For both men and women aged between 16 and 64, who were defined as having a saving orientation, the safest perceived way to save for retirement was through an employer’s pension scheme.
Malcolm McLean, consultant at Barnett Waddingham, said: “The ONS findings confirm the big disparity between the haves and the have-nots when it comes to overall pension saving ratios.
“They also provide evidence of the extra value of saving through a defined benefit pension scheme in somewhat stark contrast to the average level produced through the now more typical defined contribution arrangement, which may or may not have had a financial contribution from an employer in the past.
“It is good to note that the safest perceived way to save for retirement is through an employer’s scheme and that gives hope that the current auto-enrolment programme will yield positive results, in terms of the numbers contributing at least, and that may result in better value saving through defined contribution schemes boosted by employer contributions over time.
“Although the halcyon days of the gold-plated final salary scheme may be largely gone forever, there is still the possibility of re-invigorating a form of defined benefit saving with greater risk sharing between the member and the employer. The government’s proposals to bring this about are awaited with much interest and anticipation.”