Latest TPR research
The Pensions Regulator (TPR) has published the latest edition of the ‘Defined Benefit Landscape’[1], its annual report on all DB occupational pension schemes registered with TPR (including those also providing DC benefits, as well as schemes not eligible for the Pension Protection Fund - PPF). This research is separate from the Purple Book, now published by the PPF and covering only PPF-eligible schemes, which is due out on 17 January 2020. A summary of key findings from the DB Landscape, based on information from the pension schemes register on 31 March 2019, is provided below.
Headlines
- 13% of DB/hybrid schemes remained open to new members
- 52% of memberships were in schemes which are closed to new members
- The private sector had 10% active memberships compared with 37% of those in public service schemes
Schemes by status
In 2019:
- 43% of schemes were closed to new members
- 40% were closed to future accrual
- 13% were open
- 3% were in wind-up
The comparable percentages for 2010, the earliest year covered by the DB Landscape research, were: 48%; 22%; 17%; and 13%, respectively.
The figures vary quite materially depending on scheme size. For 2019, in schemes with 10,000 or more members:
- 56% were closed to new members
- 25% were closed to future accrual
- 19% were open
- 1% were in wind-up
The comparable percentages for schemes with 100 to 999 members were: 43%; 49%; 7%; and 2%, respectively.
Membership by status
In 2019:
- 52% of memberships were in schemes closed to new members
- 29% were in schemes closed to future accrual
- 19% were in open schemes
- 1% were in schemes in wind-up
The respective percentages for 2010 were 57%, 6%, 35% and 2%.
Across all schemes, there were 1,058,864 active members, 5,136,528 deferreds and 4,529,185 pensioners.
Principal employer type
Schemes sponsored by a college or education institution had more open schemes (31%) than schemes with any other type of principal employer (including government/public body where the equivalent percentage was 25%). The corresponding figures for private and public limited companies were 9% and 6%, respectively. Registered charity was also 6%. In terms of the proportion of memberships by status and principal employer:
- For schemes sponsored by a college or education institution, 71% of memberships were in open schemes.
- For schemes sponsored by government/public body, private limited company, public limited company or registered charity, the respective percentages were 10%, 17%, 11% and 27%.
Scheme funding
The following funding figures represent the schemes’ Part 3 funding valuations on a common date of end March 2019. For all schemes covered by the DB Landscape research, total assets were £1,700.95 billion and total liabilities were £1,860.20 billion. The split between type of scheme was:
- For open schemes, £289.62bn assets / 317.2bn liabilities.
- For schemes closed to new members, £987.18bn / £1,075.10bn.
- For schemes closed to future accrual, £424.15bn / £467.82bn.
Most schemes, regardless of status, had a funding level of between 75% and 100%.
Indexation information
Schemes can adopt a variety of approaches to increases to pensions in payment. According to the DB Landscape research,
- For pre-April 1997, 528 schemes used CPI as their measure of price inflation and 2,042 used RPI.
- The respective figures for post-April 1997 (when indexation became a statutory requirement for benefits in excess of Guaranteed Minimum Pensions) were 1,309 and 4,083.
Public service pension schemes
There are 21 public service pension schemes. Until 2015, pension provision in the public sector was provided on a defined benefit basis. Since then, however, workers in all open public service schemes have accrued benefits on a Career Average (CARE) basis. In terms of the balance of membership types in public service schemes, there were:
- 36.7% active memberships
- 33.7% deferrreds
- 29.6% pensioners
Comment
The DB Landscape research confirms the continuing trend amongst DB schemes towards full closure (closure to future accrual), but it also illustrates important differences amongst schemes depending on their size and industry sector of their sponsoring employer.
The indexation information is also noteworthy in the sense that, if the Government moves ahead with the proposal to change RPI, by aligning RPI with CPI, a significant proportion of schemes will be affected.