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More employees join workplace pensions. Pearson May News Update - Thursday 29 October
- More employees join workplace pensions
- Don't make spending cuts at expense of business support, says FPB
More employees join workplace pensions
There has been an increase in the number of employees who are contributing to occupational pension schemes.
Figures released by the Office for National Statistics (ONS) showed that the total membership of workplace pensions rose to 9 million in 2008 compared with 8.8 million in 2007.
However, the number of employees in defined benefit schemes, which include final salary pensions, fell from 2.7 million in 2007 to 2.6 million last year.
But the rate at which defined benefit scheme memberships are declining appears to have slowed. In 2006, there were 3 million members.
Defined contribution, or money purchase, schemes in the private sector, on the other hand, revealed an increase: in 2007 such schemes, which do not guarantee a fixed retirement income, had 900,000 members; last year that figure was one million.
Concerns have been voiced at the number of final salary pension schemes that are being closed to both new and existing employees on the grounds of affordability and the lower returns on pension investments being delivered by the stock markets as a result of the economic downturn.
The ONS data seem to confirm that money purchase schemes are cheaper than their defined benefit counterparts.
On average in 2008, private sector employers made contributions of 14.6 per cent of salary to open final salary schemes and 18.1 per cent to closed schemes. Meanwhile, for the same period, employers made contributions of 6 per cent of salary to open defined contribution schemes and 7 per cent to closed schemes.
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