Workplace pension scheme membership has increased to 68% in 2016, from 64% in 2015, driven by increases in membership of occupational defined contribution schemes.
In 2016, 88% of employees in the public sector had a workplace pension compared with 60% of private sector employees; this gap has been narrowing since the introduction of automatic enrolment in 2012.
In the private sector, employers with fewer than 100 employees saw the largest increase in workplace pension membership, from 25% in 2015 to 35% in 2016; this increase is consistent with employers’ automatic enrolment staging dates.
Part-time employees in the private sector saw larger increases from 2015 in pension membership than any other category of worker.
In the private sector, 42% of employees with workplace pensions made contributions of greater than zero but under 2% of pensionable earnings in 2016, compared with 40% of employees in 2015; the increase is likely to be driven by current minimum contribution levels for automatic enrolment.
“Workplace pension membership is at its highest level since records began in 1997. The largest increase between 2015 and 2016 was among private sector employers with fewer than 100 employees. This increase is consistent with the staged roll-out of automatic enrolment.“
Bonang Lewis, Pensions Analyst.Back to table of contents
The Annual Survey of Hours and Earnings (ASHE) is an important source of information on workplace pensions in the UK as it collects information on all types of workplace pension: occupational pension schemes, group personal pensions and group stakeholder pensions. The occupational defined contribution category includes employees who have pensions with the National Employer Savings Trust (NEST). Data for group self-invested personal pensions (GSIPP) are included within the category group personal pensions (GPP) throughout this bulletin. The survey results are used widely to analyse pension participation and to monitor the impacts of pension reforms.
ASHE collects information on employee membership of the current employer’s workplace pension scheme. This does not include preserved rights in any former employer’s pension scheme or pensions paid by former employers.
ASHE collects information from employers on employee jobs, although they are referred to in this bulletin as “employees”. For further information on ASHE please see the Quality and methodology section.
The main content of this bulletin relates to 2016 and has a reference date of the week containing 13 April 2016. Comparisons with 2015 relate to revised data, tables for which are published as part of this release (see datasets).
Workplace pension reforms
The Pensions Act 2008 put in place a framework for workplace pension reform designed to increase private pension saving in the UK. This framework was updated as part of the Pensions Act 2011 and 2014. One of the main reforms was that, from October 2012, all eligible employees are to be automatically enrolled into a qualifying workplace pension scheme.
Automatic enrolment applies to eligible employees who are not already participating in a qualifying workplace pension scheme. When automatic enrolment was introduced in October 2012, eligible employees were those earning more than £8,105 per year (£10,000 in April 2016). Eligible employees are those aged between 22 and State Pension age1.
Automatic enrolment is being introduced in stages, based on the size of the employer’s PAYE scheme on 1 April 2012. Automatic enrolment started in October 2012 for employers with over 120,000 employees, with staged roll-out to all employers by 2018.
Under automatic enrolment, employers select a pension scheme for their employees. Employers have a duty to enrol all eligible employees into a pension scheme meeting the qualifying requirements set out within the Pensions Act 2008 and 2011 and to make contributions to this scheme on their employees’ behalf. Workers are able to opt out of their employer’s scheme if they wish but, if they are still eligible, they will be re-enrolled after a 3-year period.
In order to be considered a qualifying pension scheme, schemes will eventually have to receive minimum contributions of 8% of an employee’s qualifying earnings, of which at least 3% must come from the employer by April 2019. However, there is a phasing in period, during which lower contributions are allowed. From October 2012 to April 2018 the minimum contribution is 2% of an employee’s qualifying earnings of which at least 1% must come from the employer.
These reforms represented a major change in the UK private pension system, aiming to extend coverage to the millions of employees without a private pension, in particular those in the target market of moderate to low earners.Back to table of contents
Figure 1 shows workplace pension scheme membership by pension type between 1997 and 2016. In 2016, 68% of employees belonged to a workplace pension scheme, the highest percentage since 1997 when the series began. In 1997, 55% of employees belonged to a workplace pension scheme. In April 2012, prior to the implementation of workplace pension reforms, 47% of employees belonged to a workplace pension scheme.
Although membership was 68% overall in 2016, there were differences between sectors:
88% of public sector employees were members of a workplace pension scheme
60% of private sector employees were members of a workplace pension scheme, up from 55% in 2015
This difference between sectors has been narrowing since the introduction of automatic enrolment in October 2012.
The overall increase in workplace pension membership between 2015 and 2016 is driven by increases in occupational defined contribution pension schemes in the private sector.
Figure 2 shows the proportion of employees with a workplace pension by pension type. Occupational defined benefit remained the largest category of workplace pension in 2016 despite increases in occupational defined contribution pension membership.
However, in 2016 the share of occupational defined benefit pension membership (43%) decreased by 2 percentage points from 2015 (45%), representing less than half of total workplace pension membership in the UK, compared with 83% in 1997 when records began.
Workplace pension participation differs between the public and private sectors. Table 1 shows that in the public sector, 94% of employees with a workplace pension had an occupational defined benefit pension, compared with 15% in the private sector. Conversely, defined contribution pensions (whether occupational, group personal or group stakeholder) were more common in the private sector.
Table 1: Employees with workplace pensions: percentages by type of pension, UK, 2016
|Occupational defined benefit||Occupational defined contribution||Group personal pension||Group stakeholder pension||Unknown pension type|
|Source: Office for National Statistics|
|1. The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions). 'All employees' include employees from the public and private sectors and employees working for organisations classified as non-profit bodies.|
|2. Percentages may not sum to 100% due to rounding.|
|3. Data for group self-invested personal pensions (GSIPP) are included within the category group personal pensions (GPP).|
Download this table Table 1: Employees with workplace pensions: percentages by type of pension, UK, 2016.xls (27.6 kB)
Age is an important factor affecting workplace pension scheme membership. Figure 3 shows the proportion of employees with a workplace pension by age band.
In 2016, workplace pension membership was highest in the age groups eligible for automatic enrolment (22 years to State Pension age).
Membership falls in the age groups around State Pension age (that is, 60 and over) because many employees in these age groups are likely no longer contributing to pensions and may already be in receipt of private pensions.
Workplace pension membership has been steadily increasing in recent years for all age groups. The increase is driven by growth in occupational defined contribution and group personal and group stakeholder pension membership.
Workplace pension participation also varies by working pattern (full-time or part-time) and sex, as shown in Figure 4.
Figure 4 shows little difference between the sexes in terms of pension membership for full-time employees in both the public and private sectors. For part-time employees the gap between men and women was greater, with a higher proportion of women belonging to a workplace pension in both sectors:
in the public sector 80% of part-time female employees were members compared with 67% of part-time male employees
in the private sector 36% of part-time female employees were members compared with 31% of part-time male employees
Looking at the revised data for 2015, which is included in the datasets associated with this release, we see that the highest growth in the proportion of employees with a workplace pension between 2015 and 2016 was in the private sector. Part-time male and female employees had an increase of 8 and 7 percentage points respectively, whereas full-time male and female employees had an increase of 4 and 5 percentage points respectively.
Figure 5 shows the proportion of full-time employees with a workplace pension by sector and gross weekly earnings band.
There is a strong relationship between earnings and workplace pension scheme membership. In the private sector, full-time employees with earnings of more than £600 per week are over 3 times more likely to be members of a workplace pension scheme than those earning between £100 and £200 per week1.
Notes for: Membership by age, working pattern, sex and earnings
- Assuming an employee earned the same amount each week for a year, then they would have to earn at least £192 a week to be eligible for automatic enrolment. Employees earning below £192 would not be eligible but could choose to opt in to a workplace pension. The majority of employees in the £100 to £200 weekly earnings band are not eligible for automatic enrolment.
An employee’s occupation can affect how likely they are to have a pension. Figure 6 shows the proportion of all employees with a workplace pension by occupation. In 2016:
those in professional occupations are most likely to have a pension, at 84%
those in elementary occupations are least likely to have a pension, at 50%, up from 45% in 2015
employees in sales and customer service occupations had the largest increase from 2015, up 6 percentage points to 52%
Figure 7 shows the proportion of employees with a pension by size of employer (measured by number of employees) in 2016.
In the private sector, employers with 1 to 99 employees saw the largest increase in workplace pension membership, to 35% from 25% in 2015. This increase may be explained by automatic enrolment being introduced in stages for smaller size employers.
In the public sector, increases were smaller. Employers with 1 to 99 employees saw an increase in workplace pension membership of 4 percentage points from 2015.
In the public sector, there was little variation between the region where the employer is located and the proportion of employees with a workplace pension (Figure 8). In the private sector, membership was highest in London (64%) and lowest in the South West (58%).
In the private sector, each region or country saw at least a 4 percentage point increase in pension membership in 2016 compared with 2015. The UK, as a whole, saw a 5 percentage point increase.
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The Annual Survey of Hours and Earnings (ASHE) also collects information on workplace pension contribution rates. Employee and employer contribution rate bands are shown by sector (Figures 9 and 10) and by pension type (Figures 11 and 12).
Contribution rates by age, occupation, industry and employer size are available in the datasets published as part of this release along with revised data for 2015.
The minimum contribution rates required in order that a pension scheme may qualify for automatic enrolment are discussed in the section Workplace pension reforms.
Contribution rates for employees and employers tend to be higher in the public sector as the majority of pension schemes are defined benefit in type. In the private sector, where contribution rates tend to be lower, defined benefit pensions are less common.
Figure 9 shows the proportion of employees in each employee contribution rate band for workplace pensions in the public and private sectors.
In the public sector, nearly two-thirds of employees contributed 6% or more of pensionable earnings, compared with around a sixth in the private sector.
In the private sector, 42% of employees contribute greater than zero but under 2%, up from 40% in 2015. The increase in the proportion of employees in this contribution band is likely driven by employees who have been automatically enrolled into their workplace pension scheme and are contributing at the current minimum level.
Figure 10 shows the proportion of employees in each employer contribution rate band for all employees with a workplace pension in the public and private sectors.
In 2016, 29% of employees in the public sector received employer’s contributions from at least 15% but below 20%, an increase from 18% in 2015. The increase may be explained by changes in the teachers’ pension scheme.
In the private sector, 52% of employees received employer contributions of greater than zero and under 4% pensionable earnings, an increase from 50% in 2015. This increase may be explained by new members who have been automatically enrolled into a workplace pension with initial minimum employer contributions until the phasing of contributions is completed in 2019.
Contribution rates for both employees and employers tend to be higher for occupational defined benefit pension schemes.
Figure 11 shows the proportion of employees in each employee contribution rate band for employees with a workplace pension by pension type.
In 2016, over four-fifths of employees in occupational defined benefit schemes contributed 5% and over of their pensionable earnings, compared with around a fifth of employees with occupational defined contribution schemes and group personal and group stakeholder pensions.
The majority of employee contributions for those with occupational defined contribution and group personal and group stakeholder pensions were greater than zero but under 2%. This may be driven by the current minimum contribution levels for automatic enrolment.
Figure 12 shows the proportion of employees in each employer contribution rate band, for all employees with a workplace pension, by pension type.
The majority of employer contributions for employees with an occupational defined contribution pension and group personal and group stakeholder pensions were greater than zero but under 4% of pensionable earnings. This may be driven by the current minimum contribution levels for automatic enrolment. In 2016, this contribution band included 60% of employees with an occupational defined contribution pension, an increase from 57% in 2015.
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Automatic enrolment: Under reforms brought in by the Pensions Act 2008, with updates in the Pensions Acts 2011 and 2014, employers must enrol all eligible employees into a qualifying private pension. Workers can opt out but will be re-enrolled every 3 years and need to opt out each time. Automatic enrolment has a staged implementation to 2018 and started with the larger employers in 2012. (See also the section Workplace pension reforms, Pension Trends, Chapter 6: Private Pensions, 2013 edition, Department for Work and Pensions: Automatic Enrolment Evaluation Report 2016).
Contributions: Payments into a pension by employees or by employers.
Defined benefit scheme: An occupational pension scheme in which the rules specify the rate of benefits to be paid. The most common defined benefit scheme is a salary-related scheme in which the benefits are based on the number of years of pensionable service, the accrual rate and either the final salary, the average of selected years’ salaries or the best year’s salary within a specified period before retirement.
Defined contribution scheme: A pension scheme in which the benefits are determined by the contributions paid into the scheme, the investment return on those contributions, and the type of annuity (if any) purchased upon retirement. It is also known as a money purchase scheme. Defined contribution pensions may be occupational, personal or stakeholder pensions.
Group personal pension (GPP): An arrangement made for the employees of a particular employer or group of employers to participate in a personal pension on a group basis. This is a collecting arrangement only; the contract is between the individual and the pension provider, normally an insurance company. GPPs are a form of workplace pension.
Group self-invested personal pension (GSIPP): An arrangement made for the employees of a particular employer, or group of employers, to participate in a personal pension on a group basis. The GSIPP is similar to the group personal pension except that it is the policy holder rather than the pension provider who chooses the investments. GSIPPs are a form of workplace pension.
Group stakeholder pension: An arrangement made for the employees of a particular employer or group of employers to participate in a stakeholder pension on a group basis. This is a collecting arrangement only; the contract is between the individual and the pension provider, normally an insurance company. Group stakeholder pensions are a form of workplace pension.
Inter-Departmental Business Register: Introduced in 1994, the Inter-Departmental Business Register (IDBR) is the sampling frame for surveys of businesses carried out by the Office for National Statistics (ONS) and by other government departments. It is also a main data source for analysis of business activity.
Occupational pension scheme: An arrangement (other than accident or permanent health insurance) organised by an employer (or on behalf of a group of employers) to provide benefits for employees on their retirement and for their dependants on their death. In the private sector, occupational schemes are trust-based. Occupational pension schemes are a form of workplace pension.
Pension scheme: A legal arrangement offering benefits to members upon retirement. Schemes are provided by employers and are differentiated by a wide range of rules governing membership eligibility, contributions, benefits and taxation. Pension schemes in the private sector have trustees. Personal pensions and stakeholder pensions offered by insurance companies may also be referred to as schemes, but technically they are individual accounts rather than schemes.
Personal pension: An arrangement where the contract to provide contributions in return for retirement benefits is between an individual and an insurance company. Such plans may be taken out by individuals on their own initiative, for example, to provide a primary source of retirement income for the self-employed, or to provide a secondary income to employees who are members of occupational schemes. These would not be covered in the Annual Survey of Hours and Earnings (ASHE) results. Alternatively, they may be facilitated by an employer. These pensions are covered by ASHE and include group personal pensions and group stakeholder pensions. Personal pensions are a form of defined contribution pension.
Private sector schemes: Schemes covering the part of the economy consisting of individuals, firms and other institutions. In ASHE, the public and private sectors are classified using the legal status from the Inter-Departmental Business Register. The private sector is comprised of businesses whose legal status is defined as “Company”, “Sole Proprietor” or “Partnership”.
Public sector schemes: Schemes covering the part of the economy that is state-provided, including central and local government, schooling, health and social services, policing and the armed forces. In ASHE, the public and private sectors are classified using the legal status from the Inter-Departmental Business Register. The public sector is comprised of those whose legal status is defined as “Public corporation”, “Central government” or “Local authority”.
Stakeholder pension: Available since 2001, a flexible, portable, personal pension arrangement (provided by insurance companies) with capped management charges, that must meet the conditions set out in the Welfare Reform and Pensions Act 1999 and be registered with the Pensions Regulator. They can be taken out by an individual or facilitated by an employer. Stakeholder pensions are a form of defined contribution pension.
Standard Occupational Classification (SOC): The classificatory system used in the UK to place individuals into occupational groups.
Workplace pension: A workplace pension is a pension which is provided or facilitated by a workplace, principally for employees. It includes both occupational pension schemes and all forms of group personal and group stakeholder pensions.Back to table of contents
The ASHE Quality and Methodology Information report contains information on:
the strengths and limitations of the data
the quality of the output: including the accuracy of the data and how it compares with related data
uses and users
how the output was created
Further background information is available from the Annual Survey of Hours and Earnings (ASHE) methodology and guidance section of our website.
As ASHE is a survey of employers, it covers only workplace pensions, which are those that are either provided or facilitated by employers. It does not cover individual personal or stakeholder pensions, where individuals enter into a contract with an insurance company and where that contract is not facilitated by an employer.
In ASHE, employees are defined as making contributions to a workplace pension if they have made a contribution, or had a contribution made on their behalf, in the survey pay period.
Detailed pensions tables from the 2016 Annual Survey of Hours and Earnings (ASHE) are published as part of this release: Annual Survey of Hours and Earnings, Pension Tables 2016 Provisional Results.
In addition to information on pensions, ASHE also provides information about the levels, distribution and make-up of earnings and hours paid for employees in all industries and occupations: Annual Survey of Hours and Earnings, 2016 Provisional Results.
ASHE is based on a 1% sample of employee jobs taken from HM Revenue and Customs (HMRC) PAYE records. Information is obtained from employers and treated confidentially. ASHE does not cover the self-employed nor does it cover employees not paid during the reference period. In 2016, information related to the pay period which included 13 April.
The rules covering which employments’ employers were required to report in PAYE changed in April 2013, effectively extending the coverage of the ASHE sample to include employments that were not covered under the previous rules. The new reporting system is known as “Real Time Information” (or RTI). Analysis of 2014 results showed that the composition of the ASHE sample was not substantially distorted as a consequence of the move to RTI. This is because the majority of the RTI-type jobs were already being reported via PAYE by employers in previous years. Consequently, it is believed that impact of the move to RTI on the estimates for ASHE is negligible.
Statistics contained in this bulletin for 2015 relate to revised 2015 data, tables for which are published as part of this release: Annual Survey of Hours and Earnings, Pension Tables 2015 Revised Results.
The public and private sectors are classified using the legal status from the Inter-Departmental Business Register (see Definitions). “All employees” include employees from the public and private sectors and employees working for organisations classified as non-profit bodies.Back to table of contents
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