The Changing State of the National Pension Pot

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Self-administered pension funds now include insurance-managed funds. These had been excluded from the pension pot calculations previously.  

On a like-for-like excluded basis, self-administered pension funds account for 66% of assets held in UK pension funds in 2011, up from 55% in 2009.

Between 2008 and 2010, pension saving contributed 79% towards the total aggregate saving of households that were headed by someone who was aged between 50 and 64. When looking at the 50 to 64 age group according to the saving capacity of people on different incomes, it can be seen that those at the top with the most savings, have around eight times those who have the least saving.

For the period 2008/10, the evidenced median Defined Benefit pension saving for those households with such savings, was £177,900. In contrast, those within Defined Contribution schemes had median pension saving of £29,000. For both men and women aged between 16 and 64, and who were defined as having a saving orientation, the safest perceived way to save for retirement was through an employer’s pension scheme.

The Pension Protection Fund (PPF) is a statutory fund run by the Board of the Pension Protection Fund, a statutory corporation established under the provisions of the Pensions Act 2004.

The PPF’s main function is to provide compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to cover the Pension Protection Fund level of compensation. To help fund the Pension Protection Fund, compulsory annual levies are charged on all eligible schemes.

Investing the assets of the PPF effectively is a further key function of the organisation and the PPF is also responsible for the Fraud Compensation Fund – a fund that will provide compensation to occupational pension schemes that suffer a loss that can be attributable to dishonesty.

The latest PPF figures show that:

  • The aggregate deficit of the 6,316 funded defined benefit occupational pension schemes, mostly in the private sector, in the PPF index is estimated to have increased over the month to £236.6 billion at the end of March 2013, from a deficit of £201.5 billion at the end of February. This is down from a higher deficit of £317.0 billion in May 2012.
  • Total assets were £1,121.5 billion and total liabilities were £1,358.1 billion.
  • There were 5,080 schemes in deficit and 1,236 schemes in surplus.
  • After falling in 2007 and 2008, total contributions to self-administered pension funds increased rapidly in 2009, 2010 and 2012, mainly because of a rise in employers’ ‘special contributions’, such as deficit payments.