From the TUC

Somewhat misleading pensions statistics

28 Oct 2009, by in Pensions & Investment

The official Occupational Pensions Survey results are out today.  I’m sure great efforts have gone into making sure these are accurate, but they do not quite measure the right thing – or at least will be used as a measure of something they are not. Inevitably they will be used to fuel the attack on public sector pensions.

The problem is that the legal definition of occupational pensions no longer captures the full range of pensions provided by employers in the workplace. I am no pensions lawyer, but as I understand it the legal definition of occupational pensions used in the survey only includes trust based pensions in the private sector – and the full range of public sector pensions. Private sector trust based pensions are run by trustees who are meant to be independent and act only in the interest of scheme members. They can be defined benefit or defined contribution – indeed it is the only model for a private sector defined benefit pension.

Much as unions prefer trust based pensions, it gives a false picture of private sector pensions to exclude group personal pensions (GPPs) and stakeholder pensions if they have an employer contribution. These are simply products sold by pensions companies and have the same legal status (more-or-less) than the kind of individual private pension someone with no employer support can take out.

But if they have an employer contribution as well (which, after all, may be bigger than in a trust based scheme) it seems reasonable to include them in any measure of pensions provision in the workplace.

This is where today’s figures come unstuck. While it is useful to have these figures and understand the various contributions made by different forms of employer sponsored pension, they will inevitably be used as a measure of total workplace pensions provision – and they are not. GPPs and stakeholders are recognised by the latest Pensions Act as qualifying pensions in which employers can auto-enrol their staff (which required permission from the EU – which the TUC and consumer groups helped secure – as private pensions are covered by tough consumer protection rules that forbid auto-enrolment). They should be included in any measure of employer pension provision.

There is no doubt that many more public sector staff are in a pension than in the private sector, but the danger is today’s figures will be used to exaggerate that difference.

So what are the real figures?

The Annual Survey of Hours and Earnings includes pensions questions that cover every type of pension. New figures are due in a couple of weeks but for 2008 the picture looks like this in the private sector:

private sector workforce all with pension all with DB All with DC DC with employer cont. >0% DC with employer cont. >8% all without pension
numbers 6,116 2,352 3,764 3,594 1,263 10,895
% 35.3 13.5 21.8 20.7 7.3 62.6

Today’s occupational statistics show only 3.6 million private sector workers with employer supported pensions. That fails to count 40% of private workers who get an employer backed pension that does not meet the legal definition of an occupational pension.

But of course the real story is the 62% of the private sector workforce who do not get an employer backed pension. I’ve already blogged about these figures.

This is what Brendan had to say about the stats today:

These figures need to be treated with caution as they significantly understate employer support for pensions in the private sector. They do not include Group Personal Pensions and Stakeholder Pensions that have employer contributions. Private sector employers are increasingly choosing such schemes in preference to trust based occupational defined contribution schemes. These can still be good pensions but do not show up in these statistics.

‘But even on the most generous definition more than 60 per cent of the private sector workforce are not saving in an employer supported pension, and are likely to face poverty in retirement.

‘Private sector employers have walked away from providing good pensions for their workforce. This is why the Government has been right to introduce the new pensions system due to kick off in 2012, which will for the first time compel every employer to contribute to the pensions of their staff unless the employee opts out.

‘No doubt some will use these figures to renew their politics-of-envy attack on public sector pensions, but the real pensions crisis is in the private sector, where gold-plated boardroom pensions are boosted by taxpayers while growing numbers of ordinary workers get nothing.

‘It’s time to start levelling up rather than attacking the pensions of hard working vital public servants.’

One Response to Somewhat misleading pensions statistics

  1. Pension scheme membership – ONS figures « Connected Research
    Oct 29th 2009, 6:14 pm

    […] (GPPs) and stakeholder pension. Nigel Stanley over at the TUC has today done a very good job in highlighting this shortcoming in the figures (as well as being effectively pre-emptive in terms of some of the nuances of the […]