On the go: New data from the Pensions Regulator shows that defined benefit schemes continued to decline in 2020-21, a decrease that has gone almost unbroken since 2012.
TPR’s latest ‘Annual landscape report’, published on Tuesday, is more expansive than the Pension Protection Fund’s Purple Book, as it includes schemes that, for various reasons, are not eligible for the PPF.
The regulator’s report covers 5,522 schemes. Of these, 544 (10 per cent) are open, 2,096 (38 per cent) are closed to new members, 2,674 (48 per cent) are closed to future accrual, and 208 (4 per cent) are winding up.
It states that 2.17m (21 per cent) of members are in open schemes, 4.77m members are in schemes closed to new members, while 3.27m are in schemes closed to future accrual and 151,051 members are in schemes in wind-up.
The total number of active members has continued to decline. There were around 2m active members in 2012, which fell to around 1m in 2020 and now stands at 909,502. The decline is less marked in other categories, with the number of deferred members falling by about 1m since 2012, while the number of pensioner memberships has fallen by around 220,000.
Membership is not split evenly between sectors. Seventy-five per cent of members whose principal employer is a college or an education institution are in open schemes, chiefly the Universities Superannuation Scheme.
Where the principal employer is a charity that figure is 25 per cent, while just 4 per cent of members whose main employer is the government or another public body are in open schemes.
Among open schemes, three had funding levels below 60 per cent, 46 had funding levels between 60 and 80 per cent, 208 between 80 and 100 per cent, and 253 had funding levels exceeding 100 per cent.
A plurality — 986 — of schemes closed to new members had funding levels exceeding 100 per cent, compared with 886 schemes between 80 and 100 per cent, while 33 had funding levels below 60 per cent.
Open schemes had a net deficit of £6.8bn, compared with £25.4bn for schemes closed to new members and £1.46bn for schemes closed to future accrual.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “DB schemes are an endangered species. In the private sector, DB membership has plummeted 2.5m in the past decade, and the number of people working for a company offering them a DB scheme has halved over this time — to less than 1m. It means we need to take control of our own pension planning to be sure we can afford to retire.
“People living longer means the cost of these schemes has soared, while the fact most people change jobs more frequently means they value these pensions less highly, so there’s little incentive for employers to keep ploughing enormous sums into them.
“As a result, we’ve seen employers shutting up shop on their DB pensions by closing them to new members and then stopping further benefits being built up. Increasingly, employers are looking to offload these schemes entirely by passing them on to insurers,” Morrissey continued.
“It’s clear from this data that DB pensions are increasingly reserved for public sector employees — for private sector employees they are becoming a relic of the past.
“Instead of having a pension based on final salary and length of employment, more people’s retirement income will be determined through defined contribution schemes. And instead of providing a guaranteed level of income, it will depend on how much they contribute, and how the investments grow.
“It means we hold the responsibility for ensuring we can afford to retire how and when we want to, so the sooner we get to grips with our pension, the better,” she added.
