Survey finds DC plan inflows in UK stronger than for DB
UK - Defined contribution(DC)schemes in the UK’s private sector schemes had stronger inward cash flows than defined benefit(DB) schemes in 2000, according to the Government Actuary’s Department’s latest survey of occupational schemes. This was probably due “to their lower degree of maturity”, says the department.
Contribution rates to private sector DC schemes are a significantly lower than for DB plans, the survey finds, with employee contribution rates typically between 2 to 4% of annual earnings and employers’ less than 8%. Compared with DB schemes, employee contributions were most commonly in the range of 5 to 7% and employers’ contributions 10 to 15% in contracted out plans.
The survey found that many schemes had altered their rules since1995, the date of the previous GAD survey, in order among, other reasons, to close schemes to new entrants or offering them DC benefits while existing active members continued to build up DB benefits.
The survey provides a very detailed snapshot of where occupational pensions were just a couple of years ago in mid 2000, which can now be regarded as something of a high water mark for occupational pension provision in the UK. There were 5.7m active members in private and 4.5m active of public sector schemes, which had combined assets of 860billion pounds sterling (1,252billion euros) of which 100 billion pounds was in funded public sector arrangements. Over 8m pensions were being paid in 2000, 5.2m in private and 3m from public sector schemes.and preserved pensions came to 6.7m.
In the five years to 2000, pensions in payment seemed to keep pace with inflation for most pensioners, according to the survey. Larger schemes were on average slightly more generous in their increases than smaller ones.
Mid-2000 most scheme members were expecting to retire at 65, but even then there was a substantial minority with 60 as retiring age, particularly in DB plans, where in the private sector the most usual accrual rate was 1/60ths. Surprisingly, perhaps only 10% of private and 8% of public sector plans were paying additional voluntary contributions.
This is the GAD’s eleventh survey of occupational schemes. The full results can be accessed at www.gad.gov.uk/Pensions/Pension_scheme_survey_results_for_2000