Number of DB pension schemes and members continue to fall

The number of private sector defined benefit (DB) and hybrid pension schemes and their memberships continued to fall in 2020/21, according to data from The Pensions Regulator (TPR).

The regulator’s Annual landscape report on UK DB and hybrid schemes 2021, revealed that, as of March 2021, there were 5,522 private DB and hybrid schemes in the UK, down from 5,604 the previous year.

The number of DB and hybrid schemes has been consistently falling since TPR began its reports in 2012.

Of the 5,522 schemes, 10 per cent were open, 38 per cent were closed to new members, 48 per cent were closed to future accrual and 4 per cent were winding up.

TPR’s dataset also revealed that there were 2.17 million people (21 per cent) in open schemes, 4.77 million (46 per cent) in schemes closed to new members, 3.27 million (32 per cent) in schemes closed to future accrual and 151,051 (1 per cent) in schemes that were winding up.

Of the 2.17 million people in open schemes, 644,010 were active, while 265,492 of the 4.77 million people in schemes closed to new members were active.

The total number of active private DB and hybrid scheme members was 909,502, down from 1.02 million in 2020 and from 2.1 million in 2012.

There were 4.93 million deferred members and 4.53 million pensioner members.

Three open schemes had a funding level of less than 60 per cent, compared to 33 schemes that were closed to new members and 54 schemes closed to future accrual.

The net deficit of open schemes was £6.8bn, while schemes closed to new members had a net deficit of £25.4bn and those closed to future accrual had a deficit of £1.46bn.

In the public sector, there were 7.48 million active members, 5.38 million deferred members and 5.5 million pensioner members, bringing the total number to around 18.4 million public sector members.

Commenting on the figures, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, said: “DB schemes are an endangered species. In the private sector, DB membership has plummeted by 2.5 million in the last decade, and the number of people working for a company offering them a DB scheme has halved over this time – to less than one million. 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.

"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 (DC) 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.”

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