ACA 2011 Pension trends survey

Jan 13, 2012

Survey background

The survey was conducted by the Association of Consulting Actuaries (ACA) in the summer of 2011 for online completion and was circulated to UK employers of all sizes, selected on a random basis.

Responses were received from 468 employers running over 560 schemes. The survey report follows on from their interim report published in September and examines general workplace pension trends, including contribution levels by private sector employers and members, views on auto-enrolment and other pension reforms.  Highlights from the report, identified by the ACA, are set out below.

Survey highlights

  • Overall, a fifth of employers are looking to decrease their pension spend, balanced by 14% aiming to increase spend. A third of larger employers say they are looking to decrease their spending on pensions.
  • Over the last three years, 21% of employers report that member opt-outs from workplace pension schemes have increased.
  • Employers responding to the survey report average contributions into defined contribution schemes have changed very little over the last decade – contribution rates are generally failing to keep pace with the pension costs of longer life-spans and lower investment returns.
  • Despite a near doubling in employer contributions over the last decade, close to a third of employers (31%) expect to take over ten years to remove their defined benefit scheme deficits.
  • A quarter of employers with defined benefit liabilities are looking to buy-out or buy-in all these liabilities within the next five years, with this rising to 4 out of 10 within ten years. Within 5 years, over four out of ten are looking to partial buy-outs or buy-ins.
  • Over a third of employers expect to manage their defined benefit scheme liabilities over the next three years by offering enhanced transfer values (28%) or pension increase exchanges (8%).
  • Only just over a quarter of employers (26%) say they have budgeted for the costs of auto-enrolment, with this falling to one in seven amongst employers with 49 or fewer employees. On average, budgets are based on estimates of 25% of employees opting-out of workplace pensions following auto-enrolment, but with smaller employers estimating between 30-40% of employees will decide to opt-out.
  • 73% of employers say they are likely to auto-enrol all employees into an existing pension scheme and 27% of employers say they are likely to review their existing scheme benefits to mitigate the cost of higher scheme membership as a result of auto-enrolment, with this rising to over a third (35%) amongst the largest employers.
  • Over a half of smaller employers (with 249 employees or less) presently do not agree with the Government and the Pensions Regulator encouraging employers with small defined contribution schemes to merge these into larger multi-employer arrangements.
  • Whereas, at present, over nine out of ten employers say their employees retire at age 65 or younger, in under a decade close to four out of ten expect the typical retirement age to be 67 or later. One in six employers expect typical retirement ages to move out to between age 68 to 70 by 2020.
  • Upwards of eight out of ten private sector employers support the recommendations made by Lord Hutton that public service pensions should be scaled back (85%), that member contributions should increase (79%) and that the pension age in such schemes should increase to the State Pension Age (91%).

Full Report

The full report can be downloaded from the ACA website.