On the go: New data from the Office for National Statistics has revealed a significant drop in defined benefit scheme deficit repayment contributions, while the impact of the pandemic can now be seen in nationwide life expectancy data.
The ONS’s Financial Survey of Pension Schemes, published on Thursday, estimates a £1.5bn fall in total employer deficit repayment contributions from the fourth quarter of 2020 to the first quarter of 2021, leading to overall employer contributions falling by 5 per cent.
The survey stated that DRCs fell from £6.2bn to £4.6bn, while noting that these payments are more volatile relative to total normal employer contributions.
At the end of March 2020, the Pensions Regulator launched new guidance aimed at helping employers freeze their DB obligations for three months in response to the economic fallout from coronavirus.
Chris Bunford, principal at LCP, noted that the fall in DRC payments will come as an unwelcome reminder of the difficulties many DB schemes have faced.
He said: “Many had been breathing a sigh of relief as contribution levels increased at the end of last year, believing that the drop in cash to schemes was just a short pandemic-related blip.
“However, these figures show that cash contributions may still be difficult to come by in these unpredictable times.”
Overall, the survey showed that the market value of pension funds was £2.4tn as of March 2021, while across the two quarters, total employee contributions experienced an increase of 12 per cent.
Employee and employer contributions to defined contribution schemes grew by 6 per cent and 10 per cent respectively across the two quarters.
Meanwhile, further research published on Thursday by the ONS, revealed a decline in life expectancy among men for the first time since the 1980s, while longevity expectations for women remained unchanged — largely because of the pandemic.
In the latest estimates, the ONS saw virtually no improvement in life expectancy for women compared with 2015 to 2017, at 82.9 years, while for men life expectancy has fallen back to levels reported for 2012 to 2014, at 79 years.
Becky O’Connor, head of pensions and savings at Interactive Investor, said: “The ongoing increases to the ages at which people can access their pensions needs a serious rethink in light of this decline in longevity.
“If lifespans continue to stay the same or decline further, there can be no justification for continuing to increase pension entitlement ages. Otherwise, we have to look seriously at whether we are effectively kissing goodbye to retirement as a concept in the UK.”
She continued: “A man retiring at 67 who dies at 79 would have only 12 years after a life of hard work for retirement. This compares poorly with the 20-plus years of retirement enjoyed by previous generations.”
This is the first time the ONS has seen a decline when comparing non-overlapping periods since the series began in the early 1980s.
