Active membership in defined benefit (DB) pension schemes has decreased by half over the last decade according to figures from the Department for Work and Pensions (DWP).
Around 11 million people currently use DB pension schemes for all or part of their retirement income. There is around £1.5 trillion held under management in DB schemes, which equates to roughly 75% of UK GDP.
The average pension payment from the scheme is £7,000 per year while average annual income for pensioners is £16,000.
However, the number of active members has declined by more than 50% with the proportion of DB schemes open to new members falling from 35% in 2006 to 13% in 2016.
The DWP has opened a consultation considering the security and sustainability of DB schemes.
The green paper will review the current system of the schemes and several issues including:
- funding and investment
- the scheme’s affordability
- member protection
Plans will consider the targets of employers, The Pensions Regulator and The Pension Protection Fund.
Richard Harrington, minister for pensions, said:
“With recent high profile cases highlighting the risks inherent in defined benefit pensions, we want to ensure that these important pension schemes remain sustainable for the future and that the right protections are in place for members.”
Yvonne Braun, director of policy, long-term savings and protection at the Association of British Insurers, said:
“Defined benefit pension promises are a vital part of the retirement plans of millions of people and a health check is overdue to make sure they will deliver.”
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