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Private pension schemes in 'growing crisis'

30 October 2009 / by Andy Davies

An annual report into occupational pension schemes has confirmed a "growing crisis for private workers' pensions," an independent policy adviser has claimed.

Published by the Office of National Statistics (ONS), the Occupational Pension Schemes Report has revealed that the number of private sector workers accruing defined benefit pensions – also known as 'final salary' schemes – has fallen by 100,000 since 2007 to 2.6million in 2008.

However, this is despite the total membership of occupational pension schemes in 2008 rising to 27.7 million – an increase of one million since 2007.

Meanwhile, the number of public sector workers accruing defined benefit pension schemes has increased from 6.1 million workers in 2007 to 6.3 million workers in 2008.

The report also indicates a wide gap regarding employer contributions into defined contribution schemes and 'final salary' pensions, as seven per cent of the income received in defined contribution plans comes from employers, compared to 18 per cent for defined benefit plans.

Commenting on the findings by the ONS, Dr Ros Altmann, an independent policy adviser, says that this shows "further proof" that there is a "growing divide between pension provision for private and public sector workers".  

"The credit crisis, quantitative easing and the sharp fall in interest rates have led to much larger pension fund deficits and more private sector scheme closures," he explained.

Criticising proposals by politicians to increase the state pension age, Dr Altmann believes an independent inquiry is needed to investigate "mounting costs" before claiming the state pension needs radical reform.

"So far, all we have had is vague assurances that the costs of public sector pensions are 'fully affordable' and that there really is no problem. If this is true, let's have an independent assessment to prove it," she said.

© Fair Investment Company Ltd