Six months to go until Automatic Enrolment begins and new figures show that final salary pension scheme payouts will reach a record high.
Six months to go until Automatic Enrolment begins and new figures show that final salary pension scheme payouts will reach a record high and peak this year.
Statistics from the Department for Work and Pensions show that the average amount paid from Defined Benefit (DB) schemes will reach the highest ever level this year and the amount will fall thereafter.
The average DB pension in payment will peak at around £7,100 a year towards the end of 2012 and will fall to just above £2,400 a year by 2060, marking a significant shift in pensions saving.
Minister for Pensions, Steve Webb, said:
A generation ago employers provided final salary pensions and took on all the uncertainty - the perfect retirement solution for those lucky enough to have one.
With payouts peaking this year, final salary schemes closing and figures that show that only 38% of working-age people are saving into a private pension, it’s clear that we are facing a different world in pensions. That is why our workplace pension reforms are so critical, bringing millions of people into pension saving for the first time.
Underlying this is our plan to bring in a new single tier state pension - an absolutely crucial foundation as one in three of us are now expecting to live to 100.
Currently, around six million pensioners benefit from some form of Defined Benefit (DB) scheme but only 10% of firms have final-salary schemes that are still open. Workplace pension reform will bring up to 10 million people into pension saving from this year.
Starting in October, people working for the largest employers will be automatically enrolled into a workplace pension scheme. Smaller businesses will follow. Individuals, employers and the Government will all contribute to an employee’s pension.
Notes to editors
- Statistics are published online http://statistics.dwp.gov.uk/asd/asd1/adhoc_analysis/2012/evolution_of_pensioners_income.pdf: Evolution of Pensioners’ Income from Defined Benefit schemes. It looks at the evolution of the average payment to pensioners from Defined Benefit schemes between years 2007-2060.
Chart 1: Decline in average income from Defined Benefit schemes across all those aged State Pension Age or over
Source: DWP modelling using Pensim2
- The Chancellor confirmed that a new single tier pension for future pensioners, set above the means test will be introduced. Further details will be published in a White Paper this spring.