Aggregate contributions to private pension schemes
• Total contributions to private (non-state) pension schemes rose by only 2 per cent to £85.2 billion in 2007, following five years of strong growth. Employer contributions to funded occupational pension schemes fell from £38.7 billion in 2006 to £37.0 billion in 2007, as private sector defined benefit schemes moved from deficit into surplus.
• A fall in total pension contributions to private pension schemes was avoided in 2007 because contributions to unfunded occupational schemes and personal – including stakeholder – pension schemes rose.
• The average employee in private sector defined benefit occupational pension schemes contributed 4.9 per cent of salary to their pension in 2007, compared with 2.7 per cent for employees in defined contribution schemes.
• In 2007, the average employer contribution rate for private sector defined benefit schemes was 15.6 per cent of salary, compared with 6.5 per cent for defined contribution schemes.
• Under the Pensions Act 2008, a new system will be introduced in 2012 where employers will have to automatically enrol all eligible employees into a qualifying pension scheme and contribute on their behalf. Employers in 'not contracted out' defined contribution occupational pension schemes with 12 or more members contributed 6.0 per cent of salary in 2007 – more than twice what they will have to contribute as a statutory minimum from 2012.
• At present, employers do not have to contribute to group personal pensions (GPPs) and stakeholder pension schemes. Smaller employers (with less than 100 employees), 5 per cent of employees with GPPs and 17 per cent of those with stakeholder pensions received no employer contribution in 2008.
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