Pension specialists responsible for the business strategy, should consider reports released by ONS. The data published provides trend information and key indicators which will affect the size of the future market for private pensions.
During the past two months, ONS has released three reports with particular relevance for pension practioners. The key points are summarised below:
Life expectancy issues – (January 2008)
It is of no surprise that people are living longer. However life expectancy between the sexes is projected to narrow between 2021 and 2051. At State Pension Age (SPA), men on average are expected to live a further 21 years, women 23 years, just a two year gap. Contrast this to the position back in 1981. Women then retiring at SPA were expected on average to live 8 years longer than men.
SPA will rise to 68 for men and women by 2046. Projected life expectancy suggests the average state pension will be paid for a staggering 18 years. When Lloyd George introduced the first state pension in 1909, a benefit was paid to those over age 70, with an income of less than 12 shillings a week. Life expectancy then was less than two years!
Household assets and National Accounts –(December 2007)
In 2006 household assets held in life assurance and pensions fund reserves was c£2070bn or 160% of GDP (the peak in 1999 was 180% of GPD). Pension assets made up 54% of households’ total financial assets and 30% of net household wealth. Pension assets are hugely significant but it must be a concern that they have fallen when measured against GDP.
Contributions by employers increased from £22bn to £48bn between 2001 and 2006 and employee contributions have also increased rapidly since 2004. These rises are most likely attributed to defined benefit schemes. Changes in accounting for pension liabilities on company balance sheets has forced employers to pay more to reduce actuarial deficits. Many employees now have to contribute more to retain their final salary pensions.
In 2006 the government paid £53bn from the National Insurance Fund (NIF) in state pensions, up from £32bn in 1996. This hike highlights both the rising number of pensioners, and improving longevity. The cost to the Exchequer will spiral given the life expectancy projections. Lloyd George set aside an annual budget of £16m to pay state pensions!
Pensioner Income – (December 2007)
The average gross weekly income of single pensioners in 2005/6 was £257 for men and £229 women. Broadly 60% of these incomes (men and women) were state benefit payments. Occupational pensions accounted for 25% (men), (20%) women of the gross weekly income. Other components were personal pensions, earnings or other investments, individually none were significant.
In 1997, a stated aim of the Labour government was to take action to ensure at least 50% of retirement income should come from private sector schemes. These statistics suggest the present government faces a huge challenge to reduce dependency on state pensions. Occupational schemes are under pressure, particularly defined benefits schemes which continue to close to new members and/or further accrual.
The need for private pension savings has never been greater. Information published by ONS is clear. The government needs to offer greater incentives for workers to save. We cannot wait for personal accounts, the launch of which is at least four years away. Pension providers currently have suitable DC products, what we need is government help to achieve a step change in savings for retirement.
Contact: jeremy.ward@friendsprovident.co.uk
Pension specialists responsible for the business strategy, should consider reports released by ONS. The data published provides trend information and key indicators which will affect the size of the future market for private pensions.
During the past two months, ONS has released three reports with particular relevance for pension practioners. The key points are summarised below:
Life expectancy issues – (January 2008)
It is of no surprise that people are living longer. However life expectancy between the sexes is projected to narrow between 2021 and 2051. At State Pension Age (SPA), men on average are expected to live a further 21 years, women 23 years, just a two year gap. Contrast this to the position back in 1981. Women then retiring at SPA were expected on average to live 8 years longer than men.
SPA will rise to 68 for men and women by 2046. Projected life expectancy suggests the average state pension will be paid for a staggering 18 years. When Lloyd George introduced the first state pension in 1909, a benefit was paid to those over age 70, with an income of less than 12 shillings a week. Life expectancy then was less than two years!
Household assets and National Accounts –(December 2007)
In 2006 household assets held in life assurance and pensions fund reserves was c£2070bn or 160% of GDP (the peak in 1999 was 180% of GPD). Pension assets made up 54% of households’ total financial assets and 30% of net household wealth. Pension assets are hugely significant but it must be a concern that they have fallen when measured against GDP.
Contributions by employers increased from £22bn to £48bn between 2001 and 2006 and employee contributions have also increased rapidly since 2004. These rises are most likely attributed to defined benefit schemes. Changes in accounting for pension liabilities on company balance sheets has forced employers to pay more to reduce actuarial deficits. Many employees now have to contribute more to retain their final salary pensions.
In 2006 the government paid £53bn from the National Insurance Fund (NIF) in state pensions, up from £32bn in 1996. This hike highlights both the rising number of pensioners, and improving longevity. The cost to the Exchequer will spiral given the life expectancy projections. Lloyd George set aside an annual budget of £16m to pay state pensions!
Pensioner Income – (December 2007)
The average gross weekly income of single pensioners in 2005/6 was £257 for men and £229 women. Broadly 60% of these incomes (men and women) were state benefit payments. Occupational pensions accounted for 25% (men), (20%) women of the gross weekly income. Other components were personal pensions, earnings or other investments, individually none were significant.
In 1997, a stated aim of the Labour government was to take action to ensure at least 50% of retirement income should come from private sector schemes. These statistics suggest the present government faces a huge challenge to reduce dependency on state pensions. Occupational schemes are under pressure, particularly defined benefits schemes which continue to close to new members and/or further accrual.
The need for private pension savings has never been greater. Information published by ONS is clear. The government needs to offer greater incentives for workers to save. We cannot wait for personal accounts, the launch of which is at least four years away. Pension providers currently have suitable DC products, what we need is government help to achieve a step change in savings for retirement.
Contact: jeremy.ward@friendsprovident.co.uk
Pension specialists responsible for the business strategy, should consider reports released by ONS. The data published provides trend information and key indicators which will affect the size of the future market for private pensions.
During the past two months, ONS has released three reports with particular relevance for pension practioners. The key points are summarised below:
Life expectancy issues – (January 2008)
It is of no surprise that people are living longer. However life expectancy between the sexes is projected to narrow between 2021 and 2051. At State Pension Age (SPA), men on average are expected to live a further 21 years, women 23 years, just a two year gap. Contrast this to the position back in 1981. Women then retiring at SPA were expected on average to live 8 years longer than men.
SPA will rise to 68 for men and women by 2046. Projected life expectancy suggests the average state pension will be paid for a staggering 18 years. When Lloyd George introduced the first state pension in 1909, a benefit was paid to those over age 70, with an income of less than 12 shillings a week. Life expectancy then was less than two years!
Household assets and National Accounts –(December 2007)
In 2006 household assets held in life assurance and pensions fund reserves was c£2070bn or 160% of GDP (the peak in 1999 was 180% of GPD). Pension assets made up 54% of households’ total financial assets and 30% of net household wealth. Pension assets are hugely significant but it must be a concern that they have fallen when measured against GDP.
Contributions by employers increased from £22bn to £48bn between 2001 and 2006 and employee contributions have also increased rapidly since 2004. These rises are most likely attributed to defined benefit schemes. Changes in accounting for pension liabilities on company balance sheets has forced employers to pay more to reduce actuarial deficits. Many employees now have to contribute more to retain their final salary pensions.
In 2006 the government paid £53bn from the National Insurance Fund (NIF) in state pensions, up from £32bn in 1996. This hike highlights both the rising number of pensioners, and improving longevity. The cost to the Exchequer will spiral given the life expectancy projections. Lloyd George set aside an annual budget of £16m to pay state pensions!
Pensioner Income – (December 2007)
The average gross weekly income of single pensioners in 2005/6 was £257 for men and £229 women. Broadly 60% of these incomes (men and women) were state benefit payments. Occupational pensions accounted for 25% (men), (20%) women of the gross weekly income. Other components were personal pensions, earnings or other investments, individually none were significant.
In 1997, a stated aim of the Labour government was to take action to ensure at least 50% of retirement income should come from private sector schemes. These statistics suggest the present government faces a huge challenge to reduce dependency on state pensions. Occupational schemes are under pressure, particularly defined benefits schemes which continue to close to new members and/or further accrual.
The need for private pension savings has never been greater. Information published by ONS is clear. The government needs to offer greater incentives for workers to save. We cannot wait for personal accounts, the launch of which is at least four years away. Pension providers currently have suitable DC products, what we need is government help to achieve a step change in savings for retirement.
Contact: jeremy.ward@friendsprovident.co.uk
Pension specialists responsible for the business strategy, should consider reports released by ONS. The data published provides trend information and key indicators which will affect the size of the future market for private pensions.
During the past two months, ONS has released three reports with particular relevance for pension practioners. The key points are summarised below:
Life expectancy issues – (January 2008)
It is of no surprise that people are living longer. However life expectancy between the sexes is projected to narrow between 2021 and 2051. At State Pension Age (SPA), men on average are expected to live a further 21 years, women 23 years, just a two year gap. Contrast this to the position back in 1981. Women then retiring at SPA were expected on average to live 8 years longer than men.
SPA will rise to 68 for men and women by 2046. Projected life expectancy suggests the average state pension will be paid for a staggering 18 years. When Lloyd George introduced the first state pension in 1909, a benefit was paid to those over age 70, with an income of less than 12 shillings a week. Life expectancy then was less than two years!
Household assets and National Accounts –(December 2007)
In 2006 household assets held in life assurance and pensions fund reserves was c£2070bn or 160% of GDP (the peak in 1999 was 180% of GPD). Pension assets made up 54% of households’ total financial assets and 30% of net household wealth. Pension assets are hugely significant but it must be a concern that they have fallen when measured against GDP.
Contributions by employers increased from £22bn to £48bn between 2001 and 2006 and employee contributions have also increased rapidly since 2004. These rises are most likely attributed to defined benefit schemes. Changes in accounting for pension liabilities on company balance sheets has forced employers to pay more to reduce actuarial deficits. Many employees now have to contribute more to retain their final salary pensions.
In 2006 the government paid £53bn from the National Insurance Fund (NIF) in state pensions, up from £32bn in 1996. This hike highlights both the rising number of pensioners, and improving longevity. The cost to the Exchequer will spiral given the life expectancy projections. Lloyd George set aside an annual budget of £16m to pay state pensions!
Pensioner Income – (December 2007)
The average gross weekly income of single pensioners in 2005/6 was £257 for men and £229 women. Broadly 60% of these incomes (men and women) were state benefit payments. Occupational pensions accounted for 25% (men), (20%) women of the gross weekly income. Other components were personal pensions, earnings or other investments, individually none were significant.
In 1997, a stated aim of the Labour government was to take action to ensure at least 50% of retirement income should come from private sector schemes. These statistics suggest the present government faces a huge challenge to reduce dependency on state pensions. Occupational schemes are under pressure, particularly defined benefits schemes which continue to close to new members and/or further accrual.
The need for private pension savings has never been greater. Information published by ONS is clear. The government needs to offer greater incentives for workers to save. We cannot wait for personal accounts, the launch of which is at least four years away. Pension providers currently have suitable DC products, what we need is government help to achieve a step change in savings for retirement.
Contact: jeremy.ward@friendsprovident.co.uk
