Contraction of coverage of DC pensions in private sector

Coverage of defined contribution schemes is not growing fast enough to fill the gap left by the closure of defined benefit schemes, leaving two-thirds of the private sector workers without a pension, according to research from the TUC.

The analysis of official private sector pensions statistics shows that between 2005 and 2008 there was a 5.1 per cent drop in the proportion of the working population in the private sector in membership of a DB pension, down from 18.6 to 13.5 per cent.

Over the same period, the increase in membership of DC schemes with an employer contribution was just 1.9 per cent 19.9 per cent to 21.8 per cent. Between 2007 and 2008, the number of people in a DC scheme with an employer contribution actually fell. The proportion of the private sector workforce without any employer funded pension scheme has risen every year since 2000, apart from a small blip in 2002 following the introduction of stakeholder pensions. The “unpensioned” have risen from 54.6 per cent of the private sector workforce in 2000 to 62.6 per cent in 2008, according to the TUC.

TUC General Secretary Brendan Barber says: “Many seem to think that the hole left by the closure of private sector salary related pension schemes is being plugged to some extent by new money-purchase DC schemes, albeit of lower quality.

“But these figures show that this is not true. The growth of DC coverage is much slower than the sharp fall in DB provision. The most recent figures even show that more people are building up a DB pension than are doing so in a DC scheme with a modest employer contribution.

“And the real scandal is that today nearly two-thirds of private sector workers are ‘unpensioned’ – without any kind of employer backed pension,” says Barber.