Number paying into private schemes at lowest ever

There were 2.9 million private sector workers placing money into schemes last year, marking the first time active membership has dipped below three million, an Office for National Statistics (ONS) report showed.

The decline pushed the overall number of active members in both private and public sector schemes down for the third year in a row in 2011, to 8.2 million.

The report comes days ahead of the Government’s landmark automatic enrolment scheme to tackle the pension savings crisis, which begins next month with the largest companies.

Active pension scheme membership has been in decline since 1991, with four million fewer members of schemes in total than the peak of 12.2m in 1967.

The Occupational Pension Schemes Survey said the recent drops reflect a fall in active membership of private sector defined benefit (DB) schemes, which has more than halved from 4.6 million in 2000 to 1.9 million last year.

Many “gold-plated” private sector DB schemes, which offer a guaranteed pension based on earnings and length of service, have been closed to new members as employers have found them increasingly expensive to run as people live longer.

However, DB schemes are the norm in the public sector, which has seen active membership increase. There were around 5.3 million active members of public sector schemes in 2011, an increase on 4.2 million in 1991.

When records began in 1953, active membership of private and public sector pension schemes was roughly equal, at around 3.1 million people in each sector.

Ros Altmann, director-general of Saga, said the figures reflected a fall in trust and confidence in pensions, fuelled by scandals, disappointments and low annuity rates which have “left many pensioners receiving much poorer value for their pension savings than ever before”.

She said: “The figures suggest that many workers who have already been offered company pension schemes are voting with their pockets and choosing not to bother. The UK pension system is the most complex in the world, comprising many different bits of pension which almost nobody understands.”