Membership low for pension scheme


Workplace pension scheme membership slipped to a 15-year low in the UK during 2012, official figures show.

Just 46% of employees belonged to a workplace pension last year, marking the lowest level recorded since similar data began in 1997, according to Office for National Statistics (ONS) figures.%VIRTUAL-SkimlinksPromo%
Pensions experts said that 2012's trough should be reversed in the coming years amid landmark Government efforts to get more people saving for their old age.

The ONS said the fall has been driven by a declining membership of defined benefit (DB) schemes, such as final salary schemes, which promise people guaranteed incomes when they retire, regardless of how well underlying investments have performed. Employers have increasingly said such schemes are too expensive for them to keep open for new members and they have replaced them with defined contribution (DC) schemes, where the worker shoulders more of the risk and their pension depends on how well their investments have done and what sort of annuity they buy.

The ONS's Annual Survey of Hours and Earnings found a "significant difference" between the private and public sectors. More than eight out of 10 (83%) public sector workers were members of a workplace pension scheme last year, compared with less than a third (32%) of private sector employees. Many public sector pensions are still DB schemes, which has caused them to be dubbed "gold-plated", as they offer certainties that many schemes in the private sector cannot match. The ONS figures showed that 91% of public sector employees with a workplace pension are in a DB scheme, compared with just a quarter (26%) in the private sector.

No strong regional variations in terms of pension membership were found by the ONS, although in the private sector, membership was at its highest in the South East at 37% and at its lowest in Wales at 29%.

Membership of workplace pensions started to dip below 50% in 2010 and it stood at around 47% in 2011.

The latest findings from the ONS were collected just before the Government's automatic enrolment scheme kicked off last autumn, which will eventually see around 10 million people automatically placed into workplace pensions. The reforms began with larger firms, and moves are also taking place within the industry to make pension schemes more transparent and attractive to savers.

Joanne Segars, chief executive of the National Association of Pension Funds, said: "We hope that this is the worst things will get. Millions will be automatically put into a pension in the coming years, so the only way is up. Auto-enrolment is a great opportunity to turn the situation around and get more people saving for their retirement."

Minister for pensions Steve Webb said: "The scale of the challenge is clear, too few people are saving for their retirement, which is why our pension reforms are so crucial. Last year we acted to make sure that all workers will have access to a workplace pension. Firms employing over a million people have already started enrolling their employees into pensions, finally reversing the downward trend."

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Membership low for pension scheme
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.
Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.

The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

Around 427,000 households in the over-70 age groups are either three months behind with a debt repayment or subject to some form of debt action such as insolvency, according to the Consumer Credit Counselling Service (CCCS).

Its figures also show that those aged 60 or older who came to the CCCS for help last year owed an average of £22,330. Whether you are retired or not, the best way to tackle debt problems is head on.

Free counselling services from the likes of CCCS and Citizens Advice can help with budgeting and dealing with creditors.

Importantly, they can also conduct a welfare benefits check to make sure you are receiving the pension credit, housing and council tax benefits, attendance and disability living allowances you are entitled to.

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The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.

The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.
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