employers' pension provision survey 2003

Department for Work and Pensions

Research Report No 207

Corporate Document Services

Employers’ Pension ProvisionSurvey 2003

Andreas Cebulla and Sandra Reyes De-Beaman

A report of research carried out by the Centre for Research in Social Policy on behalf of theDepartment for Work and Pensions

© Crown Copyright 2004. Published for the Department for Work and Pensions under licence fromthe Controller of Her Majesty’s Stationery Office by Corporate Document Services, Leeds.

Application for reproduction should be made in writing toThe Copyright Unit, Her Majesty’s Stationery Office, St Clements House, 2-16 Colegate,Norwich NR3 1BQ.

First Published 2004.

ISBN 1 84123 656 X

Views expressed in this report are not necessarily those of the Department for Work and Pensionsor any other Government Department.

Printed by The Charlesworth Group (Huddersfield, UK).

iii

ContentsThe Authors........................................................................................................................... ix

Glossary of terms ...................................................................................................................xi

Notes on terminology .......................................................................................................... xiii

Summary ............................................................................................................................... 1

1 Introduction..................................................................................................................... 71.1 Introduction ......................................................................................................... 7

1.2 Background .......................................................................................................... 7

1.3 Methods .............................................................................................................. 8

1.3.1 Data sheet ........................................................................................... 8

1.3.2 The questionnaire ................................................................................. 8

1.3.3 The sample .......................................................................................... 9

1.4 This report ............................................................................................................ 9

1.4.1 Reporting of statistical results ............................................................. 10

2 Pension provision in Britain............................................................................................. 112.1 Introduction ....................................................................................................... 11

2.2 Characteristics of private-sector organisations ..................................................... 11

2.2.1 Private-sector organisations ................................................................ 11

2.2.2 Employees in private-sector organisations ........................................... 16

2.3 Pension provision among private-sector organisations ......................................... 18

2.3.1 The incidence of pension provision in 2003 ......................................... 19

2.3.2 Characteristics of providing organisations ............................................ 23

2.3.3 Types of provision among providers .................................................... 25

2.4 The incidence of pension provision among employees of private-sector organisations ..................................................................................................... 30

2.5 The overall incidence of different pension arrangements ..................................... 32

2.6 Reasons for non-provision ................................................................................... 34

Contents

iv Contents

3 Stakeholder pensions ..................................................................................................... 373.1 Introduction ....................................................................................................... 37

3.2 Employers offering access to stakeholder pensions .............................................. 38

3.2.1 Employees’ Access to stakeholder pensions ......................................... 41

3.2.2 Employers’ contributions to stakeholder pensions................................ 44

3.2.3 Contributions to stakeholder pensions ................................................ 45

3.3 Private stakeholder pensions ............................................................................... 46

3.4 Pension provision before stakeholder pensions .................................................... 47

4 Changes to pension provision ........................................................................................ 494.1 Introduction ....................................................................................................... 49

4.2 Changes in the overall incidence of pension provision 1996-2003........................ 50

4.2.1 Changes in pension provision: detailed picture for organisations .......... 52

4.2.2 Changes in pension provision among employees over time .................. 55

4.2.3 Active membership among employees ................................................ 57

4.3 Changes to pension provision ............................................................................. 59

4.3.1 Anticipated changes among non-providers ......................................... 59

4.3.2 Recent changes among providers........................................................ 59

4.3.3 Anticipated changes among providers ................................................ 63

4.4 Attributing changes in incidence of provision ...................................................... 67

5 Occupational pensions ................................................................................................... 695.1 Introduction ....................................................................................................... 69

5.2 Occupational pension providers .......................................................................... 69

5.3 Occupational pension schemes ........................................................................... 71

5.3.1 Size of schemes .................................................................................. 71

5.3.2 Closed and frozen schemes ................................................................ 73

5.3.3 Types of occupational schemes ........................................................... 75

5.3.4 Age and industrial sector of occupational schemes .............................. 77

5.3.5 Reasons for scheme closures ............................................................... 81

5.3.6 Contracting out of State Second Pension ............................................ 83

5.4 Membership of occupational schemes ................................................................. 85

5.4.1 Membership restrictions ..................................................................... 85

5.4.2 Membership profile ............................................................................ 87

5.4.3 Pension ages ...................................................................................... 89

5.5 Contributions to occupational schemes ............................................................... 92

5.5.1 Employee contributions ...................................................................... 92

5.5.2 Employer contributions ....................................................................... 92

5.6 Scheme valuations .............................................................................................. 94

5.6.1 Minimum Funding Requirement valuations ......................................... 95

5.6.2 Scheme’s own funding valuations ....................................................... 97

6 Group Personal Pensions and personal pensions ........................................................... 1016.1 Introduction ..................................................................................................... 101

6.2 Group Personal Pensions ................................................................................... 101

6.2.1 Group Personal Pension providers ..................................................... 101

6.2.2 Group Personal Pension Schemes ..................................................... 103

vContents

6.3 Employer contributions to employees’ personal pension plans ........................... 106

6.3.1 Personal Pension contributors ........................................................... 106

7 Occupational pensions schemes – administration ......................................................... 1117.1 Introduction ..................................................................................................... 111

7.2 Administrative characteristics ............................................................................ 111

7.3 Trustees ........................................................................................................... 113

7.3.1 Trustee arrangements....................................................................... 115

7.3.2 Member nominated trustee requirements ......................................... 119

8 Pension rights upon divorce, survivor benefits and retirement ages .............................. 1218.1 Introduction ..................................................................................................... 121

8.2 Pension rights upon divorce .............................................................................. 121

8.2.1 Earmarking orders ............................................................................ 122

8.2.2 Pension sharing orders ...................................................................... 123

8.3 Benefits for Legal Spouses and Partners ............................................................ 124

8.4 Retirement ages and early retirement ................................................................ 127

9 Conclusions ................................................................................................................. 1319.1 Trends .............................................................................................................. 131

9.2 Stakeholder pensions ........................................................................................ 132

9.3 Occupational Pensions ...................................................................................... 132

Appendix A Technical report on sampling, fieldwork and weighting .................................. 133

Appendix B Re-run of tables from main report excluding smallercompanies or outlying cases .......................................................................... 143

References ......................................................................................................................... 147

Other research reports available ......................................................................................... 149

List of tablesTable 2.1 Size of private-sector organisations in Great Britain, 1996, 1998,

2000 and 2003 ............................................................................................... 12

Table 2.2 Industrial sector (SIC 1992) of private-sector organisations, 1996, 1998,2000 and 2003 ............................................................................................... 12

Table 2.3 Employee profile and number of years in operation: private-sectororganisations 1998, 2000 and 2003................................................................. 13

Table 2.4 Characteristics of private-sector organisations in 2003 by size of organisation ... 15

Table 2.5 Percentage of employees in private-sector organisations by size oforganisation, 1996, 1998, 2000 and 2003 ....................................................... 16

Table 2.6 Percentage of employees in private-sector organisations by industrialsector (SIC 1992), 1996, 1998, 2000 and 2003 ................................................ 17

Table 2.7 Percentage of employees in private-sector organisations by the employeeprofile and number of years in operation of organisation, 1998,2000 and 2003 ............................................................................................... 17

Table 2.8 Incidence of pension provision in 2003 by size of organisation .......................... 20

vi Contents

Table 2.9 Occupational pension scheme provision in 2003 by size of organisation ............ 22

Table 2.10 Characteristics of pension providers and non-providers in 2003 ........................ 23

Table 2.11 Organisations providing pensions in 2003 ........................................................ 26

Table 2.12 Multiple pension provision among providers by size of organisation .................. 27

Table 2.13 Main type of pension provision among providers by size of organisation ........... 29

Table 2.14 Incidence of pension provision among employees in private-sectororganisations by size of organisation, 2003 ...................................................... 30

Table 2.15 Type of pension provision among employees by size of providingorganisation .................................................................................................... 32

Table 2.16 Overall incidence of different pension arrangements ........................................ 33

Table 2.17 Main reason for non-provision of pensions by size of organisation .................... 34

Table 2.18 All reasons for non-provision of pensions by size of organisation ...................... 35

Table 3.1 Stakeholder pension access by size of the organisation ..................................... 39

Table 3.2 Employees with stakeholder pension access by size of the organisation ............ 42

Table 3.3 Active members receiving employer contributions to stakeholder pensionsby size of the organisation ............................................................................... 44

Table 3.4 Stakeholder pension schemes access or contribution, by size of theorganisation .................................................................................................... 45

Table 3.5 Employer contributions to stakeholder pension schemes by size of theorganisation .................................................................................................... 46

Table 3.6 Other forms of provision before the stakeholder pension scheme ..................... 47

Table 4.1 Trends in overall pension incidence .................................................................. 51

Table 4.2 Pension provision by size of organisation, 1996, 1998, 2000 and 2003 ............. 53

Table 4.3 Proportion of employees working for private-sector employers by type ofprovision, in 1996, 1998, 2000 and 2003......................................................... 56

Table 4.4 Active members as a percentage of the private-sector workforce by size oforganisation, 1996, 1998, 2000 and 2003 ....................................................... 58

Table 4.5 ‘To your knowledge, has this organisation seriously considered introducingsome form of pension provision for its employees?’ .......................................... 59

Table 4.6 Recent changes to pension provision among current providers(from 2000 onwards) by size of organisation .................................................... 61

Table 4.7 Recent changes to pension provision among current providers(from 1998 onwards) by age of organisation .................................................... 62

Table 4.8 Changes to occupational schemes among current providers ............................. 63

Table 4.9 Anticipated changes to pension provision by size of organisation ...................... 64

Table 4.10 Anticipated changes to pension provision by current type of provision .............. 65

Table 4.11 Anticipated changes to pension provision over next two years .......................... 66

Table 4.12 Pension provision by number of employees ...................................................... 68

Table 4.13 Pension provision by number of part-time employees ....................................... 68

Table 5.1 Occupational pension arrangements by size of organisation ............................. 70

Table 5.2 Size of occupational pension schemes .............................................................. 72

Table 5.3 Relationship between size of scheme and size of organisation .......................... 72

Table 5.4 Year of scheme closure or freezing .................................................................. 73

Table 5.5 Reasons for scheme closure to new members by type of scheme(within last four years) ..................................................................................... 74

vii

Table 5.6 Types of occupational pension schemes ........................................................... 75

Table 5.7 Percentage of active members by type and status of occupational scheme ....... 76

Table 5.8 Size of occupational pension schemes by type of scheme ................................. 76

Table 5.9 Year that occupational scheme was set up by type of scheme .......................... 78

Table 5.10 Year that occupational scheme was set up by size of scheme ........................... 79

Table 5.11 Industrial sector (SIC 1992) of occupational schemes by type of scheme ........... 79

Table 5.12 Industrial sector (SIC 1992) of occupational schemes by size of scheme ............ 81

Table 5.13 Reasons for closure of salary-related and money-purchase schemes .................. 82

Table 5.14 Organisations opening and closing pension schemes, by type of scheme(last four years) ................................................................................................ 83

Table 5.15 S2P status of occupational schemes by type of scheme .................................... 84

Table 5.16 SERPS/S2P status of occupational schemes by size of scheme ........................... 84

Table 5.17 Employees allowed to join occupational scheme by type of scheme .................. 86

Table 5.18 Employees allowed to join occupational scheme by size of scheme ................... 87

Table 5.19 Membership profile of occupational schemes by type of scheme ...................... 88

Table 5.20 Membership profile of occupational schemes by size of scheme ....................... 89

Table 5.21 Normal pension ages of occupational schemes by type of scheme .................... 90

Table 5.22 Normal pension ages of occupational schemes by size of scheme ..................... 91

Table 5.23 Employee contribution basis of occupational schemes by type of scheme ......... 92

Table 5.24 Employer contributions to occupational schemes by type of scheme(schemes with 10 or more active members) ...................................................... 93

Table 5.25 Employer contributions to occupational schemes by size of scheme(schemes with 10 or more active members) ...................................................... 94

Table 5.26 Minimum Funding Requirement valuation by type of scheme (respondents) ...... 95

Table 5.27 Minimum Funding Requirement valuation by size of scheme ............................ 95

Table 5.28 Date of Minimum Funding Requirement valuation by type of scheme ............... 96

Table 5.29 MFR value of scheme’s assets as a percentage of liabilitiesby type of scheme ........................................................................................... 96

Table 5.30 MFR value of scheme’s assets as a percentage of liabilitiesby size of scheme ............................................................................................ 97

Table 5.31 Scheme’s own ongoing funding valuation outcome by type of scheme ............. 98

Table 5.32 Scheme’s own ongoing funding valuation outcome by size of scheme .............. 98

Table 5.33 Action taken because of surplus by type of scheme .......................................... 99

Table 5.34 Action taken because of surplus by size of scheme ........................................... 99

Table 6.1 GPP arrangements by size of organisation ...................................................... 102

Table 6.2 Proportion of members of GPP who are contracted out of S2P by size oforganisation .................................................................................................. 103

Table 6.3 Year that GPP plan was set up by size of organisation .................................... 104

Table 6.4 Level of contribution of employer to GPPs by size of organisation ................... 105

Table 6.5 Arrangements for contributing to employees’ personal pension plans by sizeof organisation .............................................................................................. 107

Table 6.6 Proportion of employees with a personal pension plan that employercontributes to who are contracted out of S2P by size of organisation ............. 108

Table 6.7 Year that employer first started contributing to employees’ personal pensionplans by size of organisation .......................................................................... 108

Contents

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Table 6.8 Level of contribution of employer to employees’ personal pension plans bysize of organisation ....................................................................................... 109

Table 7.1 Administrative characteristics of occupational schemes by type of scheme ...... 112

Table 7.2 Increases of Pensions in Payment (tax-approved schemes) .............................. 112

Table 7.3 Administrative characteristics of occupational schemes by size of scheme ....... 113

Table 7.4 Trustee arrangements for occupational schemes ............................................ 115

Table 7.5 Trustee arrangements for occupational schemes by type of scheme................ 116

Table 7.6 Trustee arrangements for occupational schemes by size of scheme................. 117

Table 7.7 Number and type of trustees by type of occupational scheme ........................ 118

Table 7.8 Number and type of trustees by size of occupational scheme ......................... 118

Table 7.9 Whether any action has been taken to meet the member-nominated trusteerequirements by type of scheme .................................................................... 119

Table 7.10 Why no action has been taken to meet the member-nominated trusteerequirements by trustee arrangements – schemes not meeting thetrustee-nomination requirement .................................................................... 120

Table 8.1 Earmarking orders received, by type of scheme .............................................. 122

Table 8.2 Earmarking orders received, by size of scheme ............................................... 122

Table 8.3 Asked to implement attachment orders, by type of scheme ............................ 123

Table 8.4 Asked to implement attachment orders, by size of scheme ............................. 123

Table 8.5 Pension sharing orders received, by type of scheme........................................ 124

Table 8.6 Pension sharing orders received, by size of scheme......................................... 124

Table 8.7 Non-compulsory survivor benefits provided by contracted-out occupationalpension schemes, by type of scheme.............................................................. 125

Table 8.8 Non-compulsory survivor benefits provided by contracted-out occupationalpension schemes, by type of scheme.............................................................. 125

Table 8.9 Survivor benefits provided by contracted-in occupational pension schemes,by type of scheme ......................................................................................... 126

Table 8.10 Survivor benefits provided by contracted-in occupational pension scheme,by size of scheme .......................................................................................... 126

Table 8.11 Retirement conditions of schemes with the same retirement agefor men and women, by type of scheme ........................................................ 127

Table 8.12 Retirement conditions of schemes with the same retirement

age for men and women, by size of scheme .................................................. 129

Table A.1 Pre- and post-trace sample by size band......................................................... 137

Table A.2 Screened sample by size band........................................................................ 138

Table A.3 Response rate for main stage sample ............................................................. 139

Table A.4 Main stage response rates by size band.......................................................... 140

Table B.1 SERPS status of occupational schemes by type of scheme ............................... 143

Table B.2 Membership profile of occupational schemes by type of scheme .................... 144

Table B.3 Normal pension ages of occupational schemes by type of scheme .................. 144

Table B.4 Normal pension ages of occupational schemes by size of scheme ................... 145

Table B.5 Trustee arrangements for occupational schemes by type of scheme................ 146

List of figuresFigure 7.1 The position of trustees ................................................................................. 114

Contents

ixThe Authors

The AuthorsAndreas Cebulla is a Senior Research Fellow and Assistant Director at the Centre for Research inSocial Policy. His research interests include European social policy, the study of risk, and the evaluationand meta-evaluation of welfare-to-work programmes.

Sandra Reyes De-Beaman joined CRSP in February 2003 as a Research Fellow from the University ofLeicester. Previously, she led the research unit on ageing at the Mexican Institute of Social Security.Her main interests are the economic and policy implications of the population ageing process.

Survey design undertaken by BMRB

Sarah Wands is an Associate Director at BMRB Social Research.

Catherine Grant is a Senior Research Executive at BMRB Social Research.

Keith Bolling is a Senior Associate Director at BMRB Social Research and the lead member of theteam involved in the survey design.

xiGlossary of terms

Glossary of termsActive membership Active members are current employees who belong to

an organisation’s occupational pension scheme. Theschemes may be open, closed or frozen. Active membersare distinct from current and deferred pensioners (seebelow).

Appropriate personal pension (APP) A personal pension that is contracted-out of SERPS, seebelow.

Contracted-out Mixed Benefit Available from April 1997, these are a contracted-outSchemes (COMBS) occupational schemes where some members can be in a

defined benefit section, whilst others are in a definedcontribution section of the same scheme. Transfersbetween sections are possible. Note: this is differentfrom a scheme of one type that permits benefits to becalculated using the other basis (‘underpins’).

Contracted-out schemes arrangements These are contracted out of the State Earnings-RelatedPension Scheme or (SERPS), and must provide broadlysimilar benefits to those that would have accrued underSERPS. In return, rates of employer and employeeNational Insurance contributions are reduced. In schemesor arrangements that are not contracted out of SERPS,employers and employees pay full rate National Insurancecontributions, which entitle employees to SERPS (inaddition to the basic state pension).

Current pensioners Current pensioners are former active members ofoccupational pension schemes, who now draw theirpension from this scheme.

Defined benefit/salary-related schemes Occupational schemes specifying the benefits that arepaid on retirement (e.g. a fraction of salary for each yearof service).

xii Glossary of terms

Defined contribution/money purchase Occupational schemes where the amount of pension isschemes determined by contributions paid into the scheme and

investment returns.

Deferred pensioners Deferred pensioners were members of an occupationalpension scheme, who have now left it, usually becausethey have joined a new employer. Contributions are nolonger being made into the scheme either by the memberor the employer. The rights are frozen or retained in thescheme until they are drawn as a pension or transferredto a new pension scheme.

Group personal pension (GPP) These are personal pensions that an employer hasorganised for a group of employees, with the sametypes of provider as for personal pensions. Employersnearly always make a contribution, too, but all GPPswere included irrespective of whether they did.

Occupational pension scheme (OPS) Arrangements organised by an employer to providearrangements employees with a pension. These include defined benefit,

defined contribution and top hat schemes.

Personal pension (PP) A private type of pension arrangement between anemployee and an insurance company, building societyor bank. This survey only covered employees’ personalpensions where the employer made a contribution.

Stakeholder pension (SHP) Low-charging pension scheme aimed at people withoutaccess to occupational or private pensions, introducedin April 2001. Employers with five or more employeesand no other pension provision must provide access toSHPs.

Top hat schemes These are occupational pensions where membership isrestricted to senior managers and directors.

Notes on terminologyThe terms ‘firms’, ‘organisations’, ‘company’, ‘business’ and ‘enterprise’ have been used interchangeablyin this report, to refer to the private-sector employers sampled for the Employers’ Pension ProvisionSurvey of 2003. No significance should be attached to the use of one particular term at any point.

The following conventions are used in the tables in this report:

* less than 0.5 per cent, but more than zero

0 no respondents in this category

- category does not apply

[ ] baseline case number is 50 or lower and absolute frequencies are reported inbrackets.

xiiiNotes on terminology

1Summary

Summary

Introduction (Chapter 1)

This report presents the findings of the Employers’ Pension Provision Survey conducted in the springof 2003. The survey is the fifth of its kind, with previous surveys conducted in 1994, 1996, 1998 and2000.

In the course of the survey, a representative sample of 2002 private-sector employers in Great Britainwas interviewed about their provision, or non-provision, of pension schemes and any changes theymight have recently made to these provisions. The sample was derived from the Inter-DepartmentalBusiness Register (IDBR), which is collated by the Office for National Statistics (ONS) and includes all taxand VAT-registered businesses in England, Scotland and Wales. Interviews were conducted bytelephone, preceded by a letter from the Department for Work and Pensions inviting organisations toparticipate in this survey. The survey achieved an effective response rate of 67 per cent.

Pension provision in Britain (Chapter 2)

Almost two-thirds of private-sector businesses included in the Employers’ Pension Provision Surveywere small organisations with four or fewer employees (Table 2.1). However, these small businessesaccounted for only nine per cent of all private-sector employees, whereas 42 per cent of employeeswere working in organisations with 1000 or more employees. These organisations, in turn, made upless than one per cent of all organisations. Manufacturing, retail and banking were the main industrialsectors, both in terms of the proportion of organisations and of employees (Tables 2.2 and 2.6).

Seven per cent of organisations had occupational pension schemes, rising from as few as three percent among businesses with less than five employees to 85 per cent in organisations with 1000 ormore employees (Table 2.8). Twelve per cent of organisations offered Group Personal Pension (GPP)schemes and 15 per cent contributed to other forms of employee personal pensions (PP). The singlemost frequent provision was access to stakeholder pension (35 per cent of organisations). Whileorganisations with between 100 and 499 employees were most likely to offer GPPs or PPs, access tostakeholder pensions was, above all, provided by organisations with 20 to 49 employees. Overall, 52per cent of organisations provided some type of pension or pension access, largely as a result of theintroduction of stakeholder pensions.

2 Summary

Organisations providing some type of pension tended to be larger than non-providers, morefrequently in manufacturing and less frequently in construction, less likely to be set up for just twoyears or less and maintained a higher proportion of full-time employees (Table 2.10).

Three-quarters of organisations provided only one type of pension, including 44 per cent which onlyprovided access to stakeholder pensions (Table 2.12).

While 52 per cent of employers provided some type of pension or access to pension, 92 per cent ofemployees worked in organisations with some form of pension provision. Once again, this figure wasincreased by the inclusion of access to stakeholder pensions and the fact that 64 per cent ofemployees worked in organisations which provided this access. However, only 19 per cent ofemployees worked for organisations that provided access to stakeholder pensions and alsocontributed to these pensions (Table 2.14). The main reasons for not providing any pension were thebelief that the organisation was too small to warrant a pension scheme (36 per cent) and the cost ofprovision (12 per cent) (Table 2.17).

Stakeholder pensions (Chapter 3)

Stakeholder pensions were introduced in April 2001 to provide people who have no access toemployer-provided pensions the opportunity to join a low-charge pension scheme. Employers withfive or more employees and who do not provide occupational pensions or contribute less than threeper cent of pay to GPPs are required to offer access to stakeholder pensions. However, they are notrequired to contribute to these.

In total, 35 per cent of private-sector employers provided access to stakeholder pensions in 2003,including 80 per cent of organisations with 13 to 49 employees. Seventy per cent of smallerorganisations (up to 19 employees) providing access to stakeholder pensions, did not offer other typesof pension. Larger organisations were more likely to combine the provision of access to stakeholderpensions with the provision of other pension schemes (Table 3.1).

Although many organisations provided access to stakeholder pensions, three-quarters of theseorganisations, in fact, reported no active stakeholder pension members among their workforce. Thiswas largely the case in smaller organisations (up to 19 employees) and declined to just 28 per cent oforganisations with 1000 or more employees. In terms of employees, 23 per cent of the workforce wasin organisations which offered access to stakeholder pensions but no other pension scheme, while 42per cent worked in organisations, which offered access to stakeholder pensions, but which, in turn,had no active members (Table 3.2).

Only 17 per cent of all organisations, which provided access to stakeholder pensions, also contributedto these pensions. Among those organisations, which did contribute to active members’ stakeholderpension, 93 per cent contributed for all their active member employees (Table 3.3). Stakeholderpension schemes were more likely to receive contributions in the shape of percentages of pay than(fixed) amounts of money (Table 3.5).

About four per cent of organisations, which provided access to stakeholder pensions also madepayroll deductions on behalf of employees who had arranged their own private stakeholder pension.Of this group of organisations, only four per cent also contributed to these private stakeholderpensions.

3

Changes to pension provision (Chapter 4)

The period between 2000 and 2003 recorded a substantial increase in the proportion of private-sector organisations with one or another type of pension provision. Among smaller organisations(with up to 19 employees), the proportion offering some type of pension increased from 26 per centto 47 per cent, while among larger organisations (20+ employees), the proportion increased from 64per cent to 98 per cent (Table 4.1). The increase was largely due to the introduction, in 2001, of thestakeholder pension (in 2003, 31 per cent of smaller and 76 per cent of larger organisations providedaccess to this pension).

These increases in the proportion of organisations providing some type of pension scheme alsoincreased the proportion of employees working in organisations with pension provisions. Theproportion of employees doing so increased from 30 per cent in 2000 to 64 per cent in 2003 amongsmaller organisations and from 89 per cent to 100 per cent in larger organisations. Active membershipof pension schemes increased slightly among employees in smaller organisations (from 15 per cent to17 per cent), while it declined slightly for employees in larger organisations (from 45 per cent to 44 percent). Neither of these changes is statistically significant.

Changes in the provision of pensions were most notable among larger businesses, among which theproportion of providers of Group Personal Pensions (GPPs) and of contributors to personal pensions(PPs) both increased between 2000 and 2003 (Table 4.2). However, the period also saw an increasein the proportion of organisations with closed occupational schemes and a related decrease in theproportion of organisations with open salary-related occupational pension schemes (from 11 per centto eight per cent), despite an overall increase in the proportion of organisations with some type ofsalary-related scheme (open, closed or frozen). The provision of open money-purchase occupationalschemes increased slightly from eight per cent to nine per cent (organisations with 20+ employees),but this was much less than the change in the total provision of money-purchase schemes (increasingfrom nine per cent to 15 per cent). Of all money-purchase schemes opened between 2000 and 2003,just about half (55 per cent) were still open at the time of the 2003 survey, providing an explanationfor this differential in change. It is also worth noting, that of all closed money purchase schemes, 99per cent had between 1-19 active members, i.e. nearly all were very small. (cf Table 5.8)

Occupational schemes continued to be offered by organisations accounting for seven per cent of thetotal private-sector workforce in smaller businesses (1-19 employees) and 67 per cent of theworkforce in larger businesses (20+ employees) (Table 4.3). However, the proportion of theworkforce employed in smaller organisations, which operated closed occupational schemes, doubledfrom two per cent to four per cent, while it nearly trebled in larger organisations, rising from 12 percent to 34 per cent. The proportion of the workforce in organisations with GPPs or PPs increased, ordecreased slightly (smaller organisations contributing to PPs), for both size groups, while 48 per centof the workforce of smaller organisations and 69 per cent of that of larger organisations worked forproviders of stakeholder pension access.

Active membership of occupational schemes declined among larger businesses (not a statisticallysignificant change), but remained unchanged in smaller organisations (Table 4.4), although activemembership of open salary-related schemes in larger organisations declined substantially from 24 percent of the workforce in 2000 to 16 per cent in 2003. Between six per cent (smaller organisations) andnine per cent (larger organisations) of the workforce were members of GPPs, four per cent and oneper cent respectively received employer’s contributions to their PPs, while four per cent and three percent were active members of stakeholder pension schemes.

Summary

4

Seventeen per cent of organisations that were not providing any pension schemes in 2003 indicatedthat they had seriously considered introducing some form of pension for their employees within thenext five years or later (Table 4.5). This increased to 34 per cent of businesses with five or moreemployees.

Nearly 90 per cent of pension providers with five or more employees had made some changes to theirpension provisions since 2000, including 82 per cent, which had started to offer access to stakeholderpensions. Six per cent had opened a new GPP, five per cent had started to contribute to PPs and threeper cent had opened a new occupational pension scheme (Table 4.6). Three per cent of theseorganisations had also closed an occupational pension scheme, rising to 32 per cent amongbusinesses with 1000 or more employees.

Less than half of one per cent of current providers of occupational pensions had moved from a money-purchase to a salary-related scheme, although four per cent had changed from a salary-related to amoney-purchase scheme (Table 4.8). Further changes, such as moving to GPPs arrangements,contributing to personal pension plans to replace current provision and moving to stakeholderpension arrangement were anticipated by three, five and 15 per cent of current non-providers ofthese options (Table 4.9).

Occupational Pensions (Chapter 5)

Seven per cent of employers provided occupational pensions for their workforce, of which one-quarter provided just these pensions, while the remainder provide occupational pensions alongsideother pension schemes (mainly stakeholder pensions).

Fifty-six per cent of occupational pension schemes in private-sector organisations were openschemes, 33 per cent were closed and 11 per cent were frozen. Closed and frozen schemes tended tobe smaller in size than open schemes, covering or affecting fewer employees (Table 5.2). There wasconsiderable uncertainty among respondents as to when occupational schemes had been closed andmany suggested that closure happened more than four years ago (28 per cent of closed, 59 per centof frozen schemes). The main reasons given for closing schemes within the last four years were costs,the original intention to limit the provision to a few individuals and to set up a new or other type ofscheme (Table 5.5).

One in five occupational schemes were salary-related schemes (22 per cent), while over half (53 percent) were money-purchase schemes, although this declined to 47 per cent of open occupationalschemes (Table 5.6). The remainder were mixed, salary-related and money-purchase schemes. Opensalary-related schemes tended to have a greater median number of active members (nine) thanmoney-purchase, (one), other (zero) or any closed (one) schemes (Table 5.8).

Reasons for closing salary-related schemes were mainly costs and the intention to limit access to a fewselected individuals, the latter was also the main reason for closing money-purchase schemes (Table5.13). However, costs were rarely the reason behind the closure of money-purchase schemes. Mostclosure of occupational schemes in the last four years coincided with the opening of pension schemesduring the same period (Table 5.14). However, only 53 per cent of organisations, which closed anoccupational scheme had also opened an occupational scheme; the majority opting for offeringaccess to stakeholder pensions (78 per cent).

Summary

5

The majority of occupational pension scheme members were active members (77 per cent), ten percent were deferred pensioners and 13 per cent were active pensioners (Table 5.19). Members ofmoney-purchase schemes were less likely to be active members and more likely to be currentpensioners than members of salary-related schemes. Two in three (59 per cent) occupational schemeswere non-contributory for employees (Table 5.23).

Employers’ median contributions to open occupational pension schemes with ten or more memberswere higher for salary-related schemes (eight per cent) than for money-purchase schemes (five percent), but highest for closed schemes (13 per cent) (Table 5.24). Contribution rates increased with thesize of the occupational scheme (Table 5.25).

In one-third of salary-related occupational schemes, interview respondents did not know whether thescheme had had a Minimum Funding Requirement (MFR) valuation. Excluding these, three per cent ofopen and 11 per cent of closed salary-related schemes had been valued at less than 90 per cent of theirliabilities (Table 5.27), affecting, overall, five per cent of active members. Eighty-one per cent of theschemes that were under-funded had taken action to rectify this situation, typically by increasingemployers’ or members’ contributions (54 per cent and 33 per cent) or injecting cash into the fund(12 per cent).

Group Personal Pensions and Personal Pensions (Chapter 6)

Twelve per cent of private-sector organisations had set up a Group Personal Pension plan (GPP) fortheir employees, including around half of all businesses with 50 or more employees (cp. Table 2.8).Nearly half of all businesses also provided only GPPs and no other form of pension (Table 6.1). Ninety-five per cent of employers contributed to the GPPs, including 40 per cent who contributed for all GPPmembers. Six per cent of schemes received no employer contributions, while 67 per cent receivedemployer contributions in the form of percentages of pay and 26 per cent received fixed amounts ofmoney (Table 6.4). Organisations with 20 or more employees were particularly likely to contribute paypercentages. Among 12 per cent of GPPs, all members had contracted out of SERPS. Another 27 percent had some members contracted out.

Over the last three years, the median proportion of pay, which employers contributed to GPPs was sixper cent among businesses with up to 19 employees and five per cent among businesses with 20 ormore employees. The median amount of money contributed was £35 and £48 per week respectively.

Fifteen per cent of private-sector organisations made contributions to personal pension plans. Sixty-one per cent of organisations contributed to PPs for up to one-quarter of their employees (Table 6.5).However, because of the comparatively large proportion of smaller businesses contributing to PPs, ineffect, 71 per cent of organisations contributed to just one personal pension plan.

The administration of occupational pension schemes(Chapter 7)

One-third (33 per cent) of occupational schemes were known to be insured (Table 7.1). Money-purchase schemes (32 per cent) were more likely to be insured than salary-related schemes (23 percent). Almost all schemes were tax-approved (97 per cent). Twenty-two per cent of tax approvedschemes had increased their pensions in payment accrued since 1997 by more than the minimumlegal requirement of either the rate of inflation or five per cent (Table 7.2).

Summary

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Sixty-five per cent of occupational schemes were managed by a board of individual trustees, while 18per cent had a sole corporate trustee (Table 7.5). In 17 per cent of cases, respondents did not knowwhat type of board headed their schemes or said there were no trustees. However, respondents weremuch clearer about the trustee arrangements of money-purchase schemes than of salary-relatedschemes: 75 per cent of open money-purchase schemes were described as managed by individualtrustees and 21 per cent by sole corporate trustees (Table 7.5).

Fifty-eight per cent of occupational schemes with one or more trustees had at least one-third oftrustees nominated by members (Table 7.7). In about one-fifth of schemes (22 per cent), which hadless than one-third of their trustees nominated by members, respondents said they were not aware ofthis legal requirement. In a further 16 per cent of cases, the schemes were said to be exempt from thisregulation, while in another 15 per cent of cases, respondents noted that the schemes did not havesufficient members for the regulation to apply to them.

Pension rights upon divorce, survivor benefits and retirementages (Chapter 8)

This chapter looks at a range of technical and legal issues concerning occupational pensions.

The Welfare Reform and Pensions Act of 1999 modified the way in which pension rights may beshared between former spouses. Since 2000, a small proportion of occupational schemes had beenaffected by these regulations: two per cent had received earmarking orders, one per cent hadreceived attachment orders and one per cent received pension sharing orders (Tables 8.1, 8.3, 8.5). Inall instances, salary-related schemes were more likely to have done so, as were larger occupationalschemes.

Over 80 per cent of contracted-out and 58 per cent of contracted-in occupational schemes providednon-compulsory survivor benefits, such as for unmarried partners, children and, in the case ofcontracted-in schemes, also the legal spouse. Contracted-out money-purchase schemes were morelikely to provide survivor benefits to unmarried partners than were salary-related schemes, but theywere less likely to provide survivor benefits to children (Table 8.7). Among contracted-in schemes, 46per cent provided survivor benefits to legal spouses, although this was the case for only 28 per cent ofmoney-purchase schemes (Table 8.9).

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1 Introduction

1.1 Introduction

This report is the fifth in a series presenting the findings of a survey of employers in England, Scotlandand Wales to investigate the extent and type of pension provision offered and/or contributed to bybusinesses in the private sector. Previous surveys were conducted in 1994, 1996, 1998 and 2000. Thefieldwork for the current survey, which is the focus of this report, was completed in the Spring of2003, using Computer Assisted Telephone Interviewing (CATI).

The survey of 2003 covered 2002 organisations located in Britain, employing a total of nearly 3.5million workers.

This chapter summarises the main aims of the research and the method adopted. It also provides anoverview of the contents of subsequent chapters.

1.2 Background

The Department for Work and Pensions (DWP) commissioned the British Market Research Bureau(BMRB) and the Centre for Research in Social Policy (CRSP), Loughborough University, to carry out andanalyse the Employers’ Pension Survey 2003. As for previous surveys (Casey et al., 1996; Forth andMillward, 1999; Hales and Stratford, 2000; Smith and McKay, 2002), the aim of the 2003 survey wasto collect information about the provision and non-provision of pensions by British private-sectorbusinesses and to draw comparisons with previous surveys to record changes in the patterns and theextent of provision over time.

Previous reports commented not only on the extent of pension provision in general, but also paidparticular attention to policy changes at the time. In this report, one specific focus is the impact of theintroduction of the stakeholder pension in April 2001 on pension provision. Conducted two yearsafter businesses with five or more employees and no alternative pension provisions were required, forthe first time, to provide access to stakeholder pensions, this survey contains information about howemployees’ take-up of pensions as well as employers’ provision of, and contributions to, pensionshave since changed.

A further focus of this survey and its analysis has been to record changes made to the provision ofoccupational pension schemes. Since the last survey, it had been widely reported in the media thatbusinesses were closing their salary-related, defined-benefit schemes and/or replacing them with

Introduction

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money-purchase, defined-contribution schemes. The 2003 survey provides evidence of the currentpattern of pension provisions and, by comparison with previous surveys’ findings, indications ofchanges to this pattern.

1.3 Methods

1.3.1 Data sheet

As in previous years, an advance letter and a ‘datasheet’ were sent to respondents before they tookpart in the telephone interview. The letter was despatched on DWP headed notepaper to encourageresponse.

The datasheet provided a description of the main types of pension schemes the organisations mightprovide. It also contained some of the key questions from the survey and was designed to encouragerespondents to refer to documents or their pension specialists in advance of the main interview sothey could gather the more complex and detailed information required in advance of the interview.Respondents were asked to record details on the datasheet, such as the types of pension schemestheir organisation provided, the number of employees within each scheme and some detailedquestions on the nature of any occupational schemes they had in place. To assist them with theiranswers, respondents were asked to keep the datasheet with them during the interview.

In addition, a website was created from which respondents could access the aforementioned advanceletter and the datasheet as well as more detailed information about the survey –www.surveyofpensions.org.

1.3.2 The questionnaire

The questionnaire closely followed the structure and content of that used in the 2000 survey. But italso contained a few alterations and additions in order to reflect the introduction of the stakeholderpension and the concern with establishing the extent of changes that businesses might have made totheir provision of occupational pensions since the last survey.

The questionnaire was divided into eight main sections:

Section A recorded information about the organisation, including the size and composition of itsworkforce.

Section B recorded the type of pension schemes (occupational, group pension, stakeholder pension,personal private pensions), which the organisation might have provided or contributed to.

Section C was the first of five sections (C-G) dealing with the provision of specific types of pensionproducts, in this instance, stakeholder pensions.

The following section D collected information about employers’ contributions to private stakeholderpensions, which employees had joined without the organisation providing access to them.

Section E recorded information about occupational pension schemes provided by organisation,collected detailed data about the administration, membership, contributions and conditions ofentitlement of the three largest schemes, and more basic data about any other schemes (up to afurther seven).

Introduction

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Section F focused on group personal pensions, again recording detailed information about the threelargest schemes that organisations might have provided and more limited information about anyother schemes.

Section G explored the extent and level to which organisations contributed to employees’ privatepensions other than Stakeholder or Group Personal Pensions.

Section H, finally, asked organisations to indicate any recent or planned changes to their pensionprovision, including, for instance, changes from salary-related to money-purchase occupationalpension schemes.

1.3.3 The sample

The survey sought to capture a representative sample of private sector organisations in Britain. Thesample was drawn from the Inter-Departmental Business Register (IDBR), which is held by the Officefor National Statistics (ONS) and is based on businesses’ VAT and PAYE returns. In total, a sample of9792 private-sector enterprises or enterprise groups was drawn from the Register, stratified by sizeband, i.e. the number of employees in these organisations. Larger businesses were oversampledbecause of their smaller total numbers and in order to ensure a sufficient coverage of employees, mostof whom are working in these larger organisations.

After eliminating ineligible and duplicate records, a final sample of enterprises was drawn fromamong this initial sample for further screening, including the identification of correct telephonenumbers. At the end of this process, 3213 employers were invited to take part in this survey, resultingin 2002 completed interviews (66.6% response rate). Further details can be found in Appendix A.

This was only the second time that the IDBR was used for sampling. It was first used in the 2000employers’ pension survey. Previous surveys had relied on the business records held by Dun andBradstreet, which tended to under-represent smaller employers. The use of different sampling framesin the years between 1994 and 1998 and the 2000 and 2003 samples means comparisons should betreated with caution.

1.4 This report

This report is divided into nine chapters. Following this introduction, Chapter 2 describes theorganisations included in the Employers’ Pension Provision Survey and their types of pensionprovision. It also summarises the reasons given by the organisations for not providing any pensions.Chapter 3 examines organisations’ provision of access to stakeholder pensions, the extent to whichemployers contributed to these pensions and to stakeholder pensions arranged privately byemployees. Changes in the provision of pensions over time are explored in Chapter 4, which draws onthe findings of previous surveys of employers’ pension provision. Chapter 5 and Chapter 6respectively discuss the level of occupational and Group Personal Pension provision among Britishbusinesses. In Chapter 7, additional information is provided about the administration of occupationalpensions, in particular the nomination of trustees. Chapter 8 looks specifically at the current practiceof splitting or sharing an occupational pension upon a scheme member’s divorce; the extent to whichthese schemes offered additional benefits for spouses, partners or children; and the definitions ofretirement ages and the scope for early retirement. Finally, Chapter 9 draws together the mainfindings from this survey.

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1.4.1 Reporting of statistical results

This report includes some comparisons of the findings of the 2003 survey of employers’ pensionprovision with those of the 2000 survey, in particular in Chapter 4. Generally, only findings that arestatistically significant at the 95 per cent level have been reported, unless otherwise stated.

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2 Pension provision in Britain

2.1 Introduction

This chapters begins with a description of the private-sector organisations covered by the 2003Employers’ Pension Provision Survey, briefly drawing out some differences with the sample used inthe 2000 survey. Subsequent sections explore the extent and type of pension provisions, thuspresenting the first findings from this year’s survey.

Although some tables and commentary in this chapter already include comparisons with data fromprevious surveys of employers’ provision of pensions, a detailed discussion of changes in pensionprovisions is reserved for Chapter 4.

2.2 Characteristics of private-sector organisations

2.2.1 Private-sector organisations

In 2003, as in 2000, the majority of organisations in the sample were limited companies (66 per cent).In addition, 14 per cent each were sole proprietors or partnerships and six per cent were non-profit-making organisations.

Nearly two-thirds of organisations were small businesses with up to four employees (Table 2.1), withabout another quarter (23 per cent) employing between five and 12 workers. Organisations with 50or more employees accounted for only about three per cent of organisations.

The adoption of new sizeband categories (distinguishing between organisations with up to fouremployees, and others) in 2003 to reflect the introduction of stakeholder pensions, which must beprovided by employers with five or more employees, limits the comparability of the 2003 data withdata from previous years (where the smallest category was one to five employees). This said, the datasuggest a broadly similar size distribution of businesses across the years and a continued prevalenceof smaller businesses, including a sustained larger proportion of very small firms (up to four or up tofive employees) since 2000.

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Table 2.1 Size of private-sector organisations in Great Britain, 1996,1998, 2000 and 2003

Column percentages

Size of organisation 1996 1998 2000 20031

Up to 5 employees1 61 60 66 63

6 – 12 employees1 26 28 21 23

13 – 19 employees 6 5 6 5

20 – 49 employees 5 4 5 6

50 – 99 employees 1 1 1 2

100 – 499 employees 1 1 1 1

500 – 999 employees * * * *

1000+ employees * * * *

Weighted base (all) 992 1961 1977 2002

Unweighted base (all) 1831 1945 1977 2002

Note: * = Less than 0.5 per cent but more than zero. 1 Size bands for 2003: up to 4 employees and 5-12 employees,

the remainder as shown.

The authors of the 2000 report pointed out that the increase in the share of very small businessesbetween 1998 and 2000 may be because the 2000 survey had been conducted during November andDecember of that year, thus possibly picking up a number of seasonal workers employed during thepre-Christmas period. In 2003, as in years prior to the 2000 survey, fieldwork was again undertakenin the spring, yet the survey still found a higher proportion of very small firms than the 1998 survey,despite limiting the sizeband to four instead of five employees.

The largest industrial sector of organisations in the 2003 sample was, as in 2000, the banking, financeand business services sector, whose share of all organisations increased from 31 per cent in 2000 to35 per cent in 2003 (Table 2.2). The second largest sector was retail, distribution, hotels and catering(28 per cent), the third largest sector, manufacturing (11 per cent). There was little change in theshares of organisations in these and other industrial sectors, which accounted for the remaining26 per cent of organisations.

Table 2.2 Industrial sector (SIC 1992) of private-sector organisations,1996, 1998, 2000 and 2003

Column percentages

Industry sector 1996 1998 2000 2003

Agriculture and fishing 4 2 2 2

Energy and water * * * *

Manufacturing 12 11 11 11

Construction 9 9 8 8

Retail, distribution, hotels and catering 30 34 29 28

Transport and communications 4 4 4 3

Banking, finance and business services 29 0 31 35

Education and health 3 4 6 5

Other services 9 6 9 8



Note: * = Less than 0.5 per cent, but more than zero.


13

In comparison to 2000, a larger percentage of organisations had been founded within the last fiveyears (23 per cent) (Table 2.3). At the same time, more organisations had started operating 20 or moreyears ago (37 per cent), while the proportion of businesses in the sample in operation for between fiveand 19 years declined (39 per cent).

Table 2.3 Employee profile and number of years in operation: private-sector organisations 1998, 2000 and 2003

Column percentages

1998 2000 2003

Number of years since organisation started operating

Less than 2 years ago 8 6 5

2 – 4 years ago 14 13 18

5 – 10 years ago 23 28 20

11 – 19 years ago 25 23 19

20+ years ago 30 30 37

Percentage of male employees

0% 9 12 10

1% – 49% 18 24 17

50% – 99% 52 49 53

100% 22 15 19

Percentage of female employees

0% 22 15 19

1% – 49% 35 32 39

50% – 99% 35 41 31

100% 9 12 10

Percentage of full-time employees

0% 7 6 6

1% – 49% 9 16 11

50% – 99% 39 41 43

100% 45 37 39

Percentage of part-time employees

0% 45 37 39

1% – 49% 30 27 31

50% – 99% 18 31 23

100% 7 6 6

Weighted base (all) 1961 1977 2002

Unweighted base (all) 1961 1977 2002


14

The period between 2000 and 2003 also saw changes in the composition of organisations’workforce. The proportion of organisations employing no male employees or whose male workforceconstituted less than half of the total workforce declined from 12 per cent and 24 per cent respectivelyin 2000 to ten per cent and 17 per cent respectively in 2003 (Table 2.3). At the same time, theproportion of organisations employing between 50 and 99 per cent male employees increased from49 per cent to 53 per cent. Changes in the proportion of organisations employing no, few or mainlyfemale staff corresponded to these changes in the employment of male employees. In particular, theproportion of organisations whose female workforce made up less than half of the workforceincreased (from 32 per cent to 39 per cent), while the proportion of organisations whose femaleworkforce constituted more than half (but less than all) of their employees decreased (from 41 percent to 31 per cent).

This increase in the proportion of organisations with a predominantly male workforce, who are morelikely than women to work full time, was also reflected in the changes in the percentages of full-timeand part-time employees between the 2000 and the 2003 surveys. In 2003, 82 per cent oforganisations reported to employ at least half of their workforce full time, up from 78 per cent in2000. Conversely, while in 2000, 37 per cent of organisations employed a largely part-time workforce(50 per cent or more), this declined to 29 per cent in 2003.

Together, the increases in the male workforce and in full-time working in the sampled organisationsare likely to increase pension coverage, which tends to be higher among men than women, andhigher among full-time than part-time employees.

A breakdown of the composition of workforce by the size of the sampled organisations reveals thatmedium-sized businesses with between 100 and 499 employees, on average, engaged the largestproportion of full-time workers (85 per cent), while smaller businesses (up to 12 employees) reported,on average, larger proportions of part-time employees (29 per cent and 28 per cent) (Table 2.4). Smallorganisations with between five and 12 employees were also more likely than other organisations toemploy proportionately more women. Across all size categories, however, private-sector organisationspredominantly employed male labour.

A breakdown of the industrial sector of operation by the size of organisation shows that largerbusinesses were more and most likely to be operating in manufacturing, while among smaller andamong some of the medium-sized businesses proportionately more were engaged in retail,distribution, hotels and catering or, in the case of the smallest businesses, in banking, finance andbusiness services. This pattern was very similar to that observed in 2000 (cp. Smith & McKay, 2002,Table 2.4, p. 17).

Half of all enterprises had been in operation for 14 or more years. Larger organisations tended to havebeen in existence for longer than smaller businesses, including half of all enterprises with 500 to 999employees in operation for at least 43 years.


15

Table 2.4 Characteristics of private-sector organisations in 2003 by size of organisation

Size of organisation (number of employees)

Up to 4 5-12 13-19 20-49 50-99 100-499 500-999 1000+ All

Median number of years in operation 11 14 17 20 25 23 43 35 14

Mean percentages:

Full-time employees 71 72 75 78 80 85 79 77 72

Part-time employees 29 28 25 22 21 15 21 24 28

Male employees 61 55 60 58 60 60 59 60 60

Female employees 39 45 40 42 40 40 41 41 40

Industry: Standard Industrial Classification:

Agriculture and fishing 3 1 2 2 1 1 1 1 3

Energy and water 0 0 0 0 * * * 2 0

Manufacturing 7 16 16 20 26 30 29 24 8

Construction 8 7 8 8 6 6 4 4 8

Retail, distribution, hotels and catering 25 37 30 25 22 19 18 22 26

Transport and communications 3 3 4 5 6 5 6 7 3

Banking, finance and business services 43 22 21 20 21 23 24 22 41

Public administration, education and health 3 6 12 15 12 11 13 13 3

Other services 9 8 7 6 5 5 5 5 9

Weighted base (all) 1255 453 106 110 39 30 4 4 2002

Unweighted base (all) 122 230 121 284 213 429 197 406 2002

Note: * = less than 0.5 per cent but than zero.

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2.2.2 Employees in private-sector organisations

The survey of employers’ provision of pensions, as in previous years, collected information about thenumber as well as characteristics (reported above) of employees in the sampled organisations. Thissection provides a summary of the findings of the analysis of these data. Further, more specificfindings, for instance, relating to employees’ membership of pension schemes will follow in laterchapters.

Reporting on the number and distribution of employees across different types of organisations isdifferent from describing organisations. This is because the majority of employees work in largerorganisation with those employing 1000 or more workers accounting for 42 per cent of theworkforce of all sampled organisations (Table 2.5). This was a slight increase over the proportionaccounted for by these organisations in 2000 and continued a trend, which started in 19981. At thesame time, the proportion of employees in organisations with up to 19 employees declined from28 per cent in 2000 to 22 per cent in 2003.

Table 2.5 Percentage of employees in private-sector organisations bysize of organisation, 1996, 1998, 2000 and 2003

Column percentages

Size of organisation 1996 1998 2000 20031

Up to 5 employees1 13 13 13 9

6 – 12 employees1 15 16 10 9

13 – 19 employees 6 6 5 4

20 – 49 employees 10 9 9 8

50 – 99 employees 6 6 6 6

100 – 499 employees 12 13 14 14

500 – 999 employees 5 5 6 7

1000+ employees 32 34 38 42



Note: 1 Size bands for 2003: up to 4 employees and 5-12 employees, the remainder as shown.

This greater representation of employees in larger organisations means that the types of pensionschemes provided by such organisations has a disproportionate effect on the access and, potentially,the take-up of pensions among the total workforce.

There were fewer substantial changes in the distribution of employees by industry. About one-quarter of employees worked in banking, finance or business services (26 per cent) and just over one-fifth in retail, distribution, hotels and catering (22 per cent) or manufacturing (21 per cent) (Table 2.6).In other words, there were proportionately more employees in manufacturing and proportionatelyfewer employees in financial and business services or in retail, distribution, hotels and catering thanthere were organisations in those sectors (cp. Table 2.2). This reflected the size distribution oforganisation operating in these sectors, as manufacturing businesses tend to be larger thanbusinesses in the other two sectors.

1 Although different sample sources may account for some of these changes.


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Table 2.6 Percentage of employees in private-sector organisations byindustrial sector (SIC 1992), 1996, 1998, 2000 and 2003

Column percentages

Industry sector 1996 1998 2000 2003

Agriculture and fishing 2 2 1 1

Energy and water 2 2 1 2

Manufacturing 20 18 21 21

Construction 5 7 4 6

Retail, distribution, hotels and catering 27 28 27 22

Transport and communications 6 5 5 6

Banking, finance and business services 25 27 23 26

Public administration, education and health 6 5 11 9

Other services 8 8 6 6



Most employees also worked in organisations established 20 or more years ago (60 per cent), inorganisations with a predominantly male workforce (69 per cent) or in organisations with a largelyfull-time workforce (82 per cent) (Table 2.7). Thirty-eight per cent of employees were employed inorganisations with a largely female workforce and 20 per cent in organisations which employed apredominantly part-time workforce. Since 2000, both shares of the workforce have declined, whilethe proportion of employees in organisations with largely male or full-time workers has risen.

Table 2.7 Percentage of employees in private-sector organisations bythe employee profile and number of years in operation oforganisation, 1998, 2000 and 2003

Column percentages

1998 2000 2003


Less than 2 years ago 4 3 1

2 – 4 years ago 6 6 5

5 – 10 years ago 14 15 14

11 – 19 years ago 16 16 18

20+ years ago 60 61 60

Percentage of male employees

0% 3 3 2

1% – 49% 31 34 30

50% – 99% 61 58 62

100% 6 5 7

Percentage of female employees

0% 6 5 3

1% – 49% 54 51 59

50% – 99% 38 41 36

100% 3 3 2

Continued


18

Table 2.7 Continued

Column percentages

1998 2000 2003

Percentage of full-time employees

0% 1 3 1

1% – 49% 15 20 14

50% – 99% 61 62 72

100% 23 16 13

Percentage of part-time employees

0% 23 16 12

1% – 49% 57 56 68

50% – 99% 19 25 16

100% 1 3 4

Weighted base (all) 1961 1977 2002

Unweighted base (all) 1961 1977 2002

2.3 Pension provision among private-sector organisations

This section explores the incidence of pension provision among private-sector organisations. Theexploration is limited to a general description of provisions, as later chapters will provide more detailabout the provision of individual pension schemes or products.

There are four types of pension provision, which are discussed in this and later chapters. They include:

• occupational pensions, which are set up by employers;

• private pensions plans, arranged by an employee with an insurance company or bank, and towhich employers contribute;

• group personal pensions, which are similar to private pension plans, but arranged by employersfor specific groups of employees. Employers may or may not contribute to these plans; and

• stakeholder pensions. Employers with five or more employees must provide access to thesepensions if they do not offer an occupational pension scheme or are affected by other exemptions(cp. Chapter 3). Employers may or may not contribute to stakeholder pensions.

In addition, different types of occupational pension schemes exist. On the one hand, there are salary-related schemes (also called defined benefit schemes), where the final pension is based on earnings,typically those received by the member in his or her final year or years of employment. On the otherhand, money-purchase schemes (or defined contribution schemes) base the final pension on themoney contributed to the fund. In the latter case, the amount of final pension is typically dependenton the performance of the pension fund, which itself is dependent on investment strategies pursuedby the fund holders and, frequently, on stock-market performance. The value of money-purchasepensions can, therefore, vary substantially, even in the short term, and is more difficult to predict thanthat of salary-related schemes.

Moreover, the survey also includes information about the incidence of ‘Top Hat’ schemes, whichsome organisations may provide specifically for their senior management.


19

Finally, occupational schemes can be operated as open, closed or frozen schemes. Open schemescontinue to provide full access to, and can be contributed to, by current and any future employeeswho decide to become members. Closed schemes, in contrast, no longer accept new members, whilecurrent members continue to make contributions to the scheme. Frozen schemes do not accept newmembers and existing members can no longer contribute to these schemes. Tables in this and laterchapters will distinguish between all or some of these sub-categories of occupational schemes asappropriate.

2.3.1 The incidence of pension provision in 2003

Some seven per cent of organisations – unchanged from 2000 – had an occupational pension scheme(Table 2.8). However, the level of provision varied substantially between organisations of differentsize and included over four-fifths of businesses with more than 1000 employees offering occupationalpensions. In contrast, provision in occupational pensions barely reached one-fifth in enterprises withup to 19 employees and was as low as three per cent among the smallest of organisations (with oneto four employees). The overall low level of provision was, therefore, largely a result of the low level ofprovision among small and medium-sized enterprises (SMEs), which made up the majority oforganisations in Britain.

Proportionately, even fewer organisations provided occupational schemes, which were open toexisting and new members: overall only four per cent of businesses did, increasing from less than 0.5per cent of businesses with up to four employees to 59 per cent of organisations with 1000 or moreemployees.

Group personal pensions were provided, and personal pensions contributed to, by 12 per cent and 15per cent of organisations respectively. Again, provisions and the incidence of contributions variedbetween organisations of different size, albeit less markedly than in the case of occupational pensionschemes.

Finally, access to stakeholder pensions was provided by 35 per cent of all organisations, including themajority of enterprises with five or more employees. Again, provision was lowest among the verysmall organisations (14 per cent), although this group of businesses is, of course, exempt fromlegislation requiring the provision of pensions.


20

Table 2.8 Incidence of pension provision in 2003 by size of organisation

Cell percentages


Type of pension provision 1-4 5-12 13-19 20-49 50-99 100-499 500-999 1000+ All

Occupational scheme 3 7 12 19 32 33 68 85 7

Open occupational schemes only * 2 9 11 17 24 46 59 4

GPP 7 12 19 35 45 56 48 47 12

Contributions to personal pensions 12 17 14 25 27 32 23 25 15

Access to stakeholder pensions1 14 64 81 85 64 65 63 63 35

Access and contributions to stakeholder pensions1 3 4 15 15 15 19 11 21 5

Contributions to private stakeholder pensions2 0 0 0 * * * * *

Any provision 32 78 95 98 98 99 100 100 52

No provision 68 22 5 2 2 1 0 0 48



Note: Each of the main categories may each be present, so percentages may add up to more than 100 per cent. Occupational schemes include open, closed and frozen schemes.1 Only stakeholder pensions, which companies offered access to. 2 Only stakeholder pensions joined privately by employees, which companies did not provide access to.

* Less than 0.5 per cent, but more than zero.

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While 35 per cent of organisations provided access to stakeholder pensions, only five per cent alsocontributed to these. As with provision, the proportion of employers contributing to stakeholderpensions increased with the size of organisation, rising to 21 per cent of businesses with 1000 or moreemployees.

Largely as a result of the introduction of the stakeholder pension, over half of all private-sectororganisations in England, Scotland and Wales (52 per cent) provided some form of pension or accessto stakeholder pensions, with nearly all enterprises with more than 20 employees having some kind ofprovision in place. Because organisations may provide more than one type of pension, the proportionof businesses providing any kind of pension is smaller than the sum total of businesses providingindividual pension schemes. In 2000, only 29 per cent of all organisations provided one or more typesof pension scheme.

As noted earlier, there are, in fact, different types of occupational pension schemes, whichorganisations might provide. These are shown in Table 2.9. More detailed information will be given inChapter 5. Larger organisations were again most likely to provide one or more types of occupationalpension scheme, with a clear separation between organisations with up to 49 employees andorganisations with 50 or more employees. This distinction was particularly marked for the case ofsalary-related occupational pensions, but also for closed occupational pensions. Between six and nineper cent of businesses with more than 20 employees had frozen one or more of their occupationalpensions schemes. Three per cent of organisations provided Top Hat schemes, including eight percent of businesses with 500-999 employees and nine per cent of businesses with more than 1000employees.


22

Table 2.9 Occupational pension scheme provision in 2003 by size of organisation


Type of occupational pension provision 1-4 5-12 13-19 20-49 50-99 100-499 500-999 1000+ All

Salary-related 2 2 6 4 21 17 46 73 3

Money purchase 2 4 5 8 8 18 30 33 3

COMBS 0 * 2 * * 1 3 7 *

Top Hat 2 6 4 4 6 6 8 9 3

Other 1 1 0 1 0 0 * * 1

Closed scheme 2 5 3 3 13 14 29 47 3

Frozen scheme 0 * 1 7 6 9 8 8 1

Any occupational provision 3 7 11 13 30 32 65 85 6



Some categories may each be present, so percentages may add up to more than 100 per cent.

Notes: * = Less than 0.5 per cent, but more than zero. Organisations could have more than one scheme. Only open and closed schemes included as occupational schemes. Detail on frozen

schemes is provided for information only – these have not been counted as occupational pension provision. COMBS schemes (Contracted-out mixed benefit schemes) were not available until April

1997. Top Hat schemes are those that were set up for senior management only or that are currently only open to senior managers.

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2.3.2 Characteristics of providing organisations

This section turns to describing the characteristics of organisations, which do or do not providespecific types of pensions or access to them. In the first instance, the proportion of organisations ofdifferent size, industrial sector and years of operation among providers and non-providers is described(Table 2.10). Thereafter, the focus shifts to examining the proportion of organisations withinindividual industrial sectors and years of operation, which do not provide any pensions or provide(access to) or contribute to one or more types of pension scheme.

Non-providers of pension schemes were mainly very small organisations (one to four employees),organisations operating in the retail, distribution, hotels and catering or the banking, finance andbusiness services sectors (Table 2.10). Among these non-providers, 36 per cent had been established20 or more years ago compared with eight per cent of those established in the last two years. Relativeto their share of all businesses (cp. Table 2.3), organisations set up between 11 and 19 years ago wereleast likely to offer no pension provision (cp. Table 2.1). In terms of industrial sector and compared totheir share of all organisations (cp. Table 2.2), manufacturing businesses were least likely and ‘otherservices’ were most likely to be non-providers.

Table 2.10 Characteristics of pension providers and non-providersin 2003

Column percentages

Non

providers Providers

Occupational Contributes

scheme GPP to PPs Stakeholder Any

Number of employees

1 - 4 employees 89 29 38 52 26 39

5 - 12 employees 11 24 22 26 42 34

13 - 19 employees 1 10 8 5 12 10

20 - 49 employees * 15 16 9 13 10

50 - 99 employees * 9 7 4 4 4

100 - 499 employees * 8 7 3 3 3

500 - 999 employees 0 2 1 * * *

1000+ employees 0 3 1 * * *

Industry sector

Agriculture and fishing 3 * * 4 1 1

Energy and water 0 * * * * *

Manufacturing 6 21 18 17 15 16

Construction 10 8 7 4 7 5

Retail, distribution, hotels

and catering 29 43 27 19 29 26

Transport and

communications 4 1 2 1 3 2

Banking, finance and

business services 33 14 37 48 29 36

Education and health 4 9 5 5 8 6

Other services 12 4 3 3 7 5

Continued


24

Table 2.10 Continued

Column percentages

Non

providers Providers

Occupational Contributes

scheme GPP to PPs Stakeholder Any

Number of years since

organisation started operating

Less than 2 years ago 8 * * 1 4 3

2 - 4 years ago 19 2 14 19 14 17

5 - 10 years ago 23 22 19 13 20 18

11 - 19 years ago 14 12 25 28 21 24

20+ years ago 36 63 41 39 41 38

Employee profile

Mean percentage of men 61 59 64 61 57 58

Mean percentage of women 39 41 36 39 43 42

Mean percentage of full time 66 74 91 79 75 78

Mean percentage of part time 34 26 9 21 25 22

Weighted base (all) 958 139 243 296 699 1050

Unweighted base (all) 136 825 726 464 1343 1870

Notes: * = Less than 0.5 per cent, but more than zero.

A disproportionate number of manufacturing businesses provided occupational pension schemes,group personal pensions or contributed to private pensions. Organisations in retail, distribution,hotels and catering were disproportionately likely to offer occupational pension schemes, whereasthose in banking, finance and business services preferred GPPs and/or contributions to personalpensions. Reflecting the higher propensity of medium-sized and larger businesses to provide any typeof pension, organisations with 13 or more employees were, in relation to their share among allbusinesses, disproportionately likely to offer some type of pension but, in particular, occupationalpensions and GPPs.

The provision of access to stakeholder pensions was less likely to be particularly concentrated amongcertain types of organisations than was the provision of other types of pension. The main exceptionwas the size of businesses. There were comparatively fewer very small businesses (up to fouremployees) among providers of access to stakeholder pensions (26 per cent of all providers), whereasorganisations with between five and 12 employees were relatively over-represented (42 per cent).

There were few differences between providers and non-providers of pension schemes in terms of thegender composition of their workforce with each reporting similar average percentages of male (58per cent - 61 per cent) or female employees (42 per cent – 39 per cent). However, on average, non-providers had a larger part-time workforce (34 per cent) than providers (22 per cent) and, in particular,providers of group personal pensions (nine per cent).

A different way of looking at the incidence of pension provision and non-provision is to examine theproportion of organisations providing or not providing these products within each individual businesscategory (Table 2.11). The emerging picture is very similar to that just described. Manufacturingbusinesses (76 per cent) and organisations in education and health (66 per cent) were most likely toprovide some form of pension or access to pensions.2 Organisations in construction were least likely

2 Few businesses operated in energy and water. This sector’s results should, therefore, be treated withcaution and will not be specifically explored here.


25

to do so (38 per cent providers). The majority of longer established organisations, but also those inoperation for between two and ten years provided some form of pension or access to pensions.Organisations in all sectors and of all sizes were more likely to provide (access to) stakeholder pensionsthan to any other form of pension scheme.

2.3.3 Types of provision among providers

The importance of stakeholder pensions was further demonstrated by the finding that they were, byfar, the most frequently provided type of pension scheme: 63 per cent of pension-providingorganisations offered (access to) this pension, either alone or in combination with other pensionschemes (Table 2.12). Stakeholder pensions, as a single provision or in combination with otherpension products, were particularly prevalent among organisations with between five and 19employees.


26

Table 2.11 Organisations providing pensions in 2003

Cell percentages

Providers

Unweighted Weighted Non

base base providers Occupational GPP PPs Stakeholder Any

Industry sector

Agriculture and fishing 26 47 [5] [6] [7] [5] [15] [21]

Energy and water 8 25 [0] [7] [2] [2] [6] [8]

Manufacturing 481 224 24 13 19 22 48 76

Construction 117 151 62 7 12 7 32 38

Retail, distribution, hotels and catering 487 556 50 11 12 10 36 50

Transport and communications 96 60 57 3 10 7 38 43

Banking, finance and business services 511 696 46 3 13 20 29 54

Education and health 145 98 34 12 12 14 59 66

Other services 131 170 70 3 5 6 29 30


Less than 2 years ago 39 108 [14] [2] [5] [4] [21] [25]

2 – 4 years ago 105 362 51 1 10 15 26 49

5 – 10 years ago 272 403 54 8 12 10 34 46

11 – 19 years ago 275 380 35 4 16 22 39 65

20+ years ago 1195 740 46 12 13 16 38 54

All 1986 2002 48 7 12 15 35 52

Notes: * = Less than 0.5 per cent, but more than zero. Figures in [ ] have a base of less than 50 cases and report absolute frequencies.

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Table 2.12 Multiple pension provision among providers by size of organisation

Column percentages


Type of pension provision 1-4 5-12 13-19 20-49 50-99 100-499 500-999 1000+ All

Single provision

Occupational scheme [2] 0 3 1 8 13 23 19 3

GPP [8] 6 4 8 7 16 4 2 11

Contributions to personal pensions [10] 8 3 1 0 0 15

Access to stakeholder pensions [17] 58 60 39 26 12 5 3 44

All single provision [37] 73 70 49 41 41 33 24 73

Multiple provision

Occupational and GPP [0] 0 3 1 7 2 6 14 1

Occupational and PP [0] 1 0 * 5 1 1 1 *

Occupational and Stakeholder [1] 8 6 6 8 7 15 17 6

GPP and PP [1] 2 2 2 8 2 1 0 2

Stakeholder and GPP [1] 5 9 11 14 15 14 6 5

Stakeholder and PP [5] 10 7 15 6 8 5 2 8

Stakeholder, occupational and GPP [0] 0 1 10 4 6 13 25 2

Occupational, PP and GPP [0] * 0 * 1 1 2 1 *

GPP, PP and Stakeholder [0] 2 2 5 5 15 3 2 2

Four schemes [0] 0 0 1 1 3 9 7 *

All multiple provision [9] 27 30 51 59 59 67 76 27

Weighted base 406 352 100 108 38 30 4 4 1044

Unweighted base 46 190 115 276 209 427 197 406 1866

Base is current providers. Notes: Columns may not sum to 100 because of rounding. Figures in [ ] have a base of less than 50 cases and report absolute frequencies.; the resultant statistics should

be treated with caution.


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Whereas, in 2000, contributions to personal pensions had been the most frequent single provision,offered by 47 per cent of all pension-providing organisations as the only type of provision (cp. Smithand McKay, 2001, p. 25), by 2003, this had fallen to just 15 per cent. Similarly, the proportion oforganisations providing only occupational pension schemes declined from 15 per cent in 2000 tothree per cent in 2003. The proportion of companies offering group personal pensions only declinedfrom 25 per cent of all organisations to 11 per cent. All these changes should be seen in the light of thesubstantial increase in the provision of pensions or the provision of access to pensions as a result of theintroduction of the stakeholder pension. Although the proportion of organisations providingoccupational, personal or group personal pensions has declined when compared to the year 2000,this does not also imply a nominal decrease in the number of pension providers among businesses as,overall, more organisations are now offering pensions or access to pensions than did in 2000 (see alsosection 4.2).

Twenty-seven per cent of organisations provided (access to) more than one type of pension (up from14 per cent in 2000), many in combination with stakeholder pensions. This increase in multipleprovisions would appear to explain some, if not most, of the decline in organisations providing onlyGPP schemes, only occupational schemes or only making contributions to private pensions. Nineteenper cent of organisations provided (access to) stakeholder pensions alongside other forms of pensionschemes. The introduction of the stakeholder pension alone would thus appear to have contributedsubstantially to the overall increase in multiple pension provision.

The following table focuses on pension provisions, which, within each organisation, have the mostmembers (Table 2.13). In nearly two-thirds of organisations, contributions to personal pensions (32per cent) and GPPs (31 per cent) covered the largest number of employees. In about one-fifth oforganisations, stakeholder pension schemes (19 per cent) or occupational schemes (18 per cent) werethe main type of pension provisions.


29

Table 2.13 Main type of pension provision among providers by size of organisation

Column percentages


Main type of pension provision 1-4 5-12 13-19 20-49 50-99 100-499 500-999 1000+ All

Occupational scheme [4] 19 21 16 23 27 60 66 18

GPP [10] 28 25 38 38 44 29 26 31

Contributions to personal pensions [14] 31 21 14 15 6 5 1 32

Access to stakeholder pensions1 [4] 23 33 32 24 23 7 8 19

Weighted base 296 167 56 81 33 28 4 4 670

Unweighted base 32 101 70 207 175 403 188 403 1579

Base is current providers. Notes: Columns may not sum to 100 because of rounding. Figures in [ ] have a base of less than 50 cases and report absolute frequencies; the resultant statistics should be

treated with caution.1 Only stakeholder pensions which companies offered access to (i.e. excluding stakeholder pensions joined privately by employees).

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Whereas in the largest organisations (500+ employees), occupational schemes were the mainprovision, smaller organisations preferred GPPs or stakeholder pensions as their main provision, whilethe very smallest of businesses tended to offer contributions to personal pensions and GPPs.

2.4 The incidence of pension provision among employeesof private-sector organisations

This section explores the potential coverage of the different types of pension provision amongstemployees in private-sector organisations. The picture that emerges is strongly affected by thecoverage achieved by larger businesses, which employ the majority of workers. It must be stressedthat the tables shown below illustrate the potential, not actual reach of pension provisions. The actualreach, that is, active membership of pension schemes or employers’ contribution to private pensions,will be examined further below and in more detail in later chapters, which look at specific pensionschemes. Please note potential coverage at the employee level does not necessarily mean allemployees have access to each type of provision that a company offers. It simply means they work fora company that makes such provision.

While 52 per cent of organisations provided some form of (access to) pension schemes (Table 2.8), thehigh level of potential coverage achieved by the larger organisations meant that, in fact, nearly allemployees (92 per cent) were working in organisations with some kind of pension provision (Table 2.14).

Table 2.14 Incidence of pension provision among employees in private-sector organisations by size of organisation, 2003

Size of organisation

(number of employees)

Type of pension provision 1-19 20+ All

Occupational scheme (any) 7 65 52Salary-related 2 53 42

Open salary-related schemes 2 41 32Money purchase 4 29 23

Open money-purchase schemes 2 26 21COMBS 1 6 5Top Hat 5 12 11Other 1 * *Closed scheme 4 34 27

GPP 12 45 38Contributions to personal pensions 15 27 25Access to stakeholder pensions1 48 69 64Access and Contributions to stakeholder pensions1 5 22 19Contribution to private stakeholder pension2 0 1 *

Any provision 64 100 92No provision 36 0 8

Weighted base (all) 434 1568 2002Unweighted base (all) 473 1529 2002

Notes: Organisations could have more than one scheme. COMBS schemes are those that are Contracted-out mixedbenefit schemes. Top Hat schemes are those set up for senior managers or only currently available to senior manage-ment. Only open and closed occupational schemes.1 Only stakeholder pensions which companies offered access to (i.e. excluding stakeholder pensions joint privately by

employees). ‘Access to stakeholder pension’ includes providers of access only and providers of access withcontributions. ‘Access and contribution’ includes only access providers also contributing to the stakeholder pension.

2 Only stakeholder pensions joined privately by employees, which companies did not provide access to.* Less than 0.5 per cent, but more than zero.


31

The widest potential coverage was achieved by stakeholder pensions. Nearly two-thirds (64 per cent)of employees worked in organisation which offered (access to) this type of pension with or withoutthe employer contributing to it. Only 19 per cent of employees were in organisations which offeredaccess and also contributed to stakeholder pensions. Occupational pensions had the second widestpotential reach, being offered by organisations employing 52 per cent of all employees, including 42per cent in organisations providing salary-related schemes and 23 per cent in organisations providingmoney-purchase schemes. This level of potential coverage was, to a large degree, the result of adisproportionate number of very large businesses offering this type of provision. However, if onlyopen occupational schemes are considered, then the proportion of employees working in organisationsproviding (open) salary-related schemes or (open) money-purchase schemes falls to 32 per cent and21 per cent respectively. One-quarter of employees (27 per cent) worked in organisations, which hadclosed one of their occupational schemes, accepting no new members, but continuing to coverexisting members.

Table 2.15 focuses only on employees who worked in organisations with at least one type of pensionprovision. Nearly four in ten employees (38 per cent) worked in organisations with a single type ofpension provision.


32

Table 2.15 Type of pension provision among employees by size ofproviding organisation

Column percentages



Type of pension provision 1-19 20+ All

Single provision

Occupational scheme 2 17 15

GPP 8 5 5

Contributions to personal pensions 12 0 2

Stakeholder pensions 52 10 16

All single provision 74 32 38

Multiple provision

Occupational and GPP 1 5 5

Occupational and PP * 2 1

Occupational and Stakeholder 8 15 14

GPP and PP 2 1 1

Stakeholder and GPP 6 8 8

Stakeholder and PP 7 5 5

Stakeholder, occupational and GPP 0 19 16

Occupational, PP and GPP 0 1 1

GPP, PP and Stakeholder 2 5 4

Four schemes 0 7 6

Multiple provision 26 68 62

Main type of provision

Occupational scheme 18 60 56

GPP 27 25 25

Contributions to personal pensions 32 4 7

Stakeholder pensions 22 11 12

Weighted base 279 1561 1840

Unweighted base 351 1515 1866

Base is employees of current providers. Main type of provision is that which has the highest number of active members.


2.5 The overall incidence of different pensionarrangements

This section provides a brief summary of the incidence of different pension arrangements. In doing so,we distinguish between the percentage of organisations which provide some form of pensionscheme, the percentage of employees in these organisations and thus potentially or actually coveredby these pension arrangements, and, finally, the proportion of active members among the private-sector workforce (Table 2.16).

Among all organisations, seven per cent had open occupational pension schemes, 12 per cent GPPs,15 per cent contributed to personal pension plans, while 35 per cent offered access to stakeholderpensions and five per cent also contributed to these. Over half of organisations provided one or moreof these pension schemes. These figures were more or less unchanged from 2000, although, ofcourse, the proportion of businesses providing some type of pension increased from 2000 (29 percent) because of the inclusion of the stakeholder pension. Three per cent of organisation operatedoccupational pension schemes that were now closed to new members.


33

Table 2.16 Overall incidence of different pension arrangements

Cell percentages

Per cent who are

Per cent of active members,

Per cent among employees working among the private-

all organisations1 in such firms1 sector workforce2

Occupational schemes 7 53 25

Open occupational schemes 5 41 19

Open salary-related schemes 2 32 13

Open money-purchase schemes 2 21 5

GPPs 12 38 8

Employer contributing to personal pensions 15 25 4

Access to stakeholder pensions 35 64 1

Access and contribution to stakeholder pensions3 5 19 1

Any provision of above 4 types 52 92 38

Closed occupational schemes 3 27 6

Closed salary-related schemes 1 25 5

Closed money-purchase schemes 2 13 *

1 Base is all organisations with at least one open or closed pension scheme.2 Base is organisations with at least one pension scheme of the given type.3 Only stakeholder pensions, which companies offered access to (i.e. excluding stakeholder pensions joined privately by

employees). * Less than 0.5 per cent, but more than zero.

In terms of the potential reach of pension provisions, 53 per cent of employees worked inorganisations with occupational schemes, which were open to existing and new members. This is thesame percentage as reported in Table 2.14 for the potential reach of all (open or closed) occupationalpension schemes.

Stakeholder pensions have the largest potential reach, as 64 per cent of employees worked inorganisations which provided (access to) this type of pension but, as noted earlier, only 19 per cent ofemployees worked in organisations which offered access and also contributed to stakeholderpensions. Thirty-eight per cent of employees worked in firms with GPPs and 25 per cent in firms whichcontributed to personal pensions. Twenty-seven per cent of employees worked in organisations,which operated closed occupational pension schemes.

However, whereas 92 per cent of employees worked in organisations with one or another kind ofpension provision, only 38 per cent were, in fact, active members of pension schemes, not countingany employees who might have had private pensions plans, to which their employers did notcontribute. Overall, active membership of pension schemes increased slightly from 37 per cent in2000 to 38 per cent of employees, due to a combination of membership of stakeholder pensions andmore employees receiving employers’ contributions to the personal pensions. However, this increaseis not statistically significant.


34

2.6 Reasons for non-provision

Non-providers were asked to indicate up to five reasons as to why they had chosen not to provide(access to) pension schemes. Table 2.17 shows the main reason given by organisations, while Table2.18 shows all reasons given. Both tables, in fact, reveal a similar pattern of responses.

The small size of the organisation and the cost to the business of providing pension schemes were themost frequent reasons for non-provision. Respectively, they accounted for 36 per cent and 12 percent of main reasons (Table 2.17) and 44 per cent and 15 per cent of all reasons (Table 2.18). Verysmall firms with less than five employees were most likely to give these reasons for not providing anypension schemes.

Table 2.17 Main reason for non-provision of pensions by size oforganisation

Column percentages



Main reason for non-provision 1-4 5+ All

Organisation is too small 41 24 36

Too costly to provide pensions/cannot afford at moment 14 8 12

Staff don’t want pensions/have never asked for a pension 7 7 7

It is not company policy to provide pensions 2 9 4

Mainly part-time or temporary staff 6 14 8

It is the responsibility of employees, not the employer 3 0 2

Staff turnover is too high/employees don’t stay long enough 0 2 1

Organisation has only recently been established 2 5 3

Only a family business 4 9 5

Haven’t got round to it/haven’t found the time to set up 4 3 3

Staff have their own personal pension schemes/arrangements 6 0 4

Negative opinion of pension provision 6 4 5

Staff do not earn enough (general) 1 0 *

Don’t know 0 5 1

Other 5 10 6

Weighted bases (non-providers) 115 47 162

Unweighted bases (non-providers) 76 60 136



35

Table 2.18 All reasons for non-provision of pensions by size oforganisation

Multiple response percentages



Reasons for non-provision 1-4 5+ All

Organisation is too small 49 30 44

Too costly to provide pensions/cannot afford at moment 17 10 15

Staff don’t want pensions/have never asked for a pension 10 11 10

It is not company policy to provide pensions 7 11 8

Mainly part-time or temporary staff 8 26 13

It is the responsibility of employees, not the employer 10 0 7

Staff turnover is too high/employees don’t stay long enough 1 5 2

Organisation has only recently been established 3 9 5

Only a family business 7 14 9

Haven’t got round to it/haven’t found the time to set up 4 7 5

Staff have their own personal pension schemes/arrangements 10 2 8

Negative opinion of pension provision 13 4 11

Staff do not earn enough (general) 1 2 1

Don’t know 59 64 60

Other 5 10 6

Weighted bases (non-providers) 115 47 162

Unweighted bases (non-providers) 76 60 136

Other reasons were, individually, much less frequently mentioned. However, having a predominantlypart-time or temporary workforce or the absence of employees requesting pension provisions wereimportant reasons for about one in ten organisations, which did not provide pension schemes.


37Stakeholder pensions

3 Stakeholder pensions

3.1 Introduction

Stakeholder pensions were introduced in April 2001 to provide people who do not have access toemployer-sponsored pensions, non-earners and the self-employed access to a pension, which is lowcharge. Key features of stakeholder pensions are:

• fund charges limited to one per cent a year of a member’s total fund;

• no penalties on transferring benefits or stopping contributions;

• a minimum contribution of not greater than £20 in any period or as a lump sum payment;

• retirement age can be at anytime between the age of 50 and 75;

• eligible for contributions up to at least the annual earning threshold (currently £3,600).

Stakeholder pensions, which are a money-purchase arrangement, are available through theworkplace as well as directly from banks, building societies, insurance companies and some retailers.Employers with five or more employees are obliged to provide employees access to stakeholderpensions, although they are not required to contribute to these pensions. Employers may also beexempt from providing access to this pension if they already provide an occupational pension or offera group personal pension to which they contribute at least three per cent of employees’ salary.

In this section, the provision of access and the extent to which employers contribute to stakeholderpensions is explored. Employers may also make payroll deductions or contribute to stakeholderpensions which employees have arranged privately. The following Section 3.2 will review employers’practice in providing access to stakeholder pensions offered through their organisation, while Section3.3 will explore the extent to which private-sector employers were contributing to private stakeholderpensions.

As has already been seen in Chapter 2 and will become more apparent in this chapter, whereas a largeproportion of employers provided access to stakeholder pensions, few employers contributed tothese pensions. As a result, the analysis presented in this chapter was heavily constrained by small casenumbers. For this reason, the data that are presented here are, in comparison to their presentation inprevious and later chapters, often highly aggregated.

38 Stakeholder pensions

Due to reporting restrictions on cases with baseline numbers below 50, in some instances, the resultsof the analysis were aggregated to allow a clearer presentation and, therefore, reading of thesestatistics. This mainly affected the breakdown of size groups. For the same reason of reportingrestrictions on cases with a small number of responses, and also because the stakeholder pensionregulation does not apply to smaller businesses, no data on organisations with fewer than fiveemployees will be presented here.

3.2 Employers offering access to stakeholder pensions

In the previous chapter, we have shown that 35 per cent of employers provided access to stakeholderpensions, rising to over 80 per cent among organisations with 13 to 49 employees, but settlingbetween 63 per cent and 65 per cent of businesses of other sizes.

In this section, the focus will be on just those organisations, which provided access to stakeholderpensions, and, in particular, on variations in the provision of access among organisations of differentsize. These organisations will be referred to as SHP (stakeholder pension) access-providers.

Smaller organisations with access to stakeholder pensions mainly provided access to stakeholderpensions, but few other pension schemes (Table 3.1). Seventy per cent of organisations with five to 19employees only offered access to stakeholder pensions, but no other type of pension.

39

Table 3.1 Stakeholder pension access by size of the organisation1

Column percentages

Size of the organisation

Combination of schemes 5-12 13-19 20-49 50-99 100-499 500-999 1000+ Total

Stakeholder 70 71 45 41 19 8 5 62

Occupational and Stakeholder 9 7 7 12 11 23 28 9

Stakeholder and GPP 7 9 13 22 20 22 9 9

Stakeholder and PP 12 8 17 9 12 8 4 12

Stakeholder, occupational and GPP * 2 13 7 11 21 40 4

GPP, PP and Stakeholder 2 3 6 8 22 4 3 4

Four schemes 0 0 1 1 5 14 12 1

Number of stakeholder schemes

1 99 100 97 96 96 91 91 98

2 1 0 3 4 4 2 5 2

3-5 0 0 1 1 * 8 5 *

Weighted base (organisations) 291 86 93 25 19 3 3 520

Unweighted base (organisations) 166 93 229 150 278 134 268

Active members as % of workforce

0 84 71 65 51 38 36 28 75

0.1 to 25 9 10 23 39 51 60 70 15

25.01-50 5 3 4 5 9 2 1 5

50.001-75 1 8 4 3 1 * 1 3

75.0001-100 1 7 3 2 1 2 0 3

Number of active members

0 84 71 65 51 38 36 25 75

1-4 13 11 15 16 18 30 18 14

5-12 3 10 11 22 22 13 11 7

13-19 0 7 3 1 3 * 4 2

20-49 0 0 5 7 12 10 11 2

50-99 0 0 0 3 6 5 9 *

100-499 0 0 0 0 2 5 16 *

500-999 0 0 0 0 0 1 4 *

1000+ 0 0 0 0 0 0 2 *

Continued

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Table 3.1 Continued

Column percentages


Combination of schemes 5-12 13-19 20-49 50-99 100-499 500-999 1000+ Total

Weighted base (schemes) 289 85 97 26 20 3 3 523

Unweighted base (schemes) 166 93 229 150 278 134 268 1318

Base are all organisations (with 5 or more employees) providing access to stakeholder pensions. * Less than 0.5 per cent, but more than zero.1 Only stakeholder pensions which companies offered access to (i.e. excluding stakeholder pensions joint privately by employees).


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Medium-sized and large organisations were more likely than small organisations to offer more thanone type of pension scheme, in particular, occupational pensions and GPPs alongside stakeholderpensions. Fourteen per cent and 12 per cent of SHP-access providing organisations with 500 to 999employees or 1000 or more employees provided all four main types of pension (Stakeholder,occupational pension, GPP, contributions to personal pensions).

Most organisations provided access to only one stakeholder pension scheme (98 per cent); however,ten per cent of businesses with 500 or more employees offered access to two or more stakeholderpensions.

In terms of coverage, three-quarters of stakeholder pension schemes did, in fact, have no activemembers, while 15 per cent of schemes had an active membership of up to 25 per cent of the SHPprovider’s workforce. The proportion of active stakeholder pension scheme membership among theworkforce was lowest among the smaller organisations, which also reported the highest incidence ofzero-membership. Between 50 per cent and 70 per cent of SHP schemes in organisations with morethan 100 employees had an active membership of up to a quarter of these organisations’ workforce.

3.2.1 Employees’ access to stakeholder pensions

Another way of looking at the extent and the distribution of access to, and active membership of,stakeholder pension schemes is to record the proportion of employees (rather than organisations)benefiting from these provisions. This is done in Table 3.2. It highlights only minor changes in thedistribution of scheme combinations, scheme numbers or active membership in each of the sizecategories when compared to those in Table 3.1. However, because most employees work for largerorganisations, the final ‘total’ column reveals markedly different distribution of frequencies. This isdue to the extra weight which is given to the provisions made by larger organisations with moreemployees.

Stakeholder pensions

42

Table 3.2 Employees with stakeholder pension access1 by size of the organisation

Column percentages

Size of the organisation Total

Combination of schemes 5-12 13-19 20-49 50-99 100-499 500-999 1000+

Stakeholder pension 68 72 44 40 20 8 2 23

Occupational and stakeholder pension 11 7 6 10 11 24 30 20

Stakeholder pension and GPP 7 10 13 24 18 20 6 11

Stakeholder pension and PP 12 7 17 11 11 9 2 7

Stakeholder, occupational and GPP 0 1 12 6 11 22 42 24

GPP, PP and stakeholder pension 2 3 6 9 24 5 2 6

Four schemes 0 0 0 1 5 12 16 9

Number of schemes

1 99 100 96 95 96 91 89 93

2 1 0 3 4 4 3 9 5

3-5 0 0 1 1 1 7 3 2

Unweighted base (organisations) 166 93 229 150 278 134 268 1343


Active members as % of workforce

0 82 71 62 53 38 39 22 42

0.1 to 25 10 10 27 37 53 57 77 52

25.01-50 5 3 4 5 6 2 * 3

50.001-75 1 7 3 3 1 * 1 2

75.0001-100 1 9 3 2 1 2 * 1

Continued

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Table 3.2 Continued

Column percentages

Size of the organisation Total

Combination of schemes 5-12 13-19 20-49 50-99 100-499 500-999 1000+

Number of active members

0 82 71 62 53 38 39 17 38

1-4 14 11 17 15 16 29 20 18

5-12 4 10 13 20 23 11 8 12

13-19 0 8 2 2 2 1 1 2

20-49 0 0 6 6 12 10 13 9

50-99 0 0 0 4 6 4 11 7

100-499 0 0 0 0 3 5 18 9

500-999 0 0 0 0 0 1 7 3

1000+ 0 0 0 0 0 0 4 2

Unweighted base (schemes) 166 92 240 162 288 142 284 1374

Weighted base (schemes) 112 66 145 87 201 92 598 1300

Base are all organisations (with 5 or more employees) providing access to stakeholder pensions. 1 Only stakeholder pensions, which companies offered access to (i.e. excluding stakeholder pensions

joined privately by employees). * Less than 0.5 per cent, but more than zero.

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About a quarter of employees worked in organisations which provided only access to stakeholderpensions (23 per cent) or access to stakeholder pensions, occupational pensions and GPPs (24 percent). One-fifth worked in organisations which offered occupational pensions and access tostakeholder pensions (20 per cent).

Approximately 40 per cent of employees worked in organisations which offered access to SHP, butwhose schemes had no active members, while 52 per cent worked in organisations with SHP schemeswith an active membership of up to 25 per cent of the workforce.

3.2.2 Employers’ contributions to stakeholder pensions

About 61 per cent of SHP-access providing organisations whose stakeholder pension schemes hadactive members also contributed to these schemes for all or some of their employees. Since 75 percent of organisations which offered access to stakeholder pensions, in fact, reported no activemembers, overall only 17 per cent of SHP-access providing organisations also contributed toemployees’ SHP plans. The number and median number of active members, who receivedcontributions, and their share of the total workforce increased with the size of the organisationmaking these contributions (Table 3.3).

Table 3.3 Active members receiving employer contributions tostakeholder pensions1 by size of the organisation

Column percentages


5-49 50-499 500-+ Total

% of active members that receive

contributions

0.1 to 25 0 3 5 1

25.01-50 2 5 11 3

50.001-75 2 1 5 2

75.0001-99.99 * 10 8 2

100 96 81 72 93

Median 7 12 75 1

Number of active members that receive

contributions

1-4 36 28 12 34

3-12 40 28 8 37

13-19 16 5 1 13

20-49 8 23 23 11

50-99 - 12 17 3

100-499 - 4 31 1

500-999 - - 4 *

1000+ - - 3 *

Weighted base 50 12 2 64

Unweighted base 76 120 127 323

Note: Figures in brackets are actual, unweighted cases.1 Only stakeholder pensions, which companies offered access to (i.e. excluding stakeholder pensions joint privately by

employees). * Less than 0.5 per cent, but more than zero.


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A breakdown of the provision of access to stakeholder pensions and of provision and contribution tothese schemes by the size of organisations shows high rates of access provision among allorganisations, but in particular those with five to 49 employees. However, it was organisations with50 to 499 employees that contributed to proportionately more of their employees’ stakeholderpension schemes than either smaller or larger organisations (Table 3.5).

Table 3.4 Stakeholder pension schemes access or contribution1, by sizeof the organisation

Cell percentages

Organisation offers access to Organisation contributes to the

Stakeholder pension stakeholder pension for any

employees

(a) (b)

Size of the Weighted Unweighted Weighted Unweighted

organisation Yes base base Yes base base

5-49 70 667 635 46 440 154

50-499 64 69 642 49 25 240

500+ 63 9 603 38 4 310

Total 35 2002 2002 60 203 711

Note: Base for (a) are all organisations; for (b) all schemes with at least one active member in organisations offering

access to stakeholder pensions. Totals include all organisations, i.e. also those with 1-4 employees.1 Only stakeholder pensions, which companies offered access to (i.e. excluding stakeholder pensions joined privately by

employees).

3.2.3 Contributions to stakeholder pensions

As we have already noted earlier, about 61 per cent of businesses providing access to SHPs and thathad active members, also contributed to these schemes. Since stakeholder pension schemes were setup, on average, just over half of schemes with active members had not received any employercontributions (Table 3.5). Among those schemes that employers had contributed to, approximatelytwo in three had received a percentage of the members’ pay (paid in by the employer), while theremainder had received a fixed money amount.


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Table 3.5 Employer contributions to stakeholder pension schemes1 bysize of the organisation

Level of contribution

Average since the

Minimum Maximum scheme was set up

Number of employees Number of employees Number of employees

Contribution 5-19 20+ 5-19 20+ 5-19 20+

No contribution 55 52 55 52 55 51

Percentage of pay 31 37 33 39 30 39

Less than 3% 2 10 1 3 0 6

3-3.9% 16 10 16 10 17 10

4-4.9% 0 2 1 2 0 2

5-5.9% 5 8 7 11 6 13

6-10% 6 7 7 12 6 7

more than 10% 2 0 2 1 0 2

Amount of money 14 10 12 9 15 9

up to £5 per week 7 6 5 4 6 3

5.01-10 p w 4 1 4 0 4 1

10.01-15 p w 3 1 3 1 3 1

15.01-25 p w 0 1 0 2 1 2

25.01-50 0 0 0 1 2 1

more than 50 p w 0 1 0 1 0 1

Weighted base 73 62 73 62 73 63

Unweighted base 62 623 62 623 61 608

Base are stakeholder pension schemes with active members.1 Only stakeholder pensions, which companies offered access to (i.e. excluding stakeholder pensions joined privately by

employees).

3.3 Private stakeholder pensions

About four per cent of organisations, which provided access to stakeholder pensions also madepayroll deductions on behalf of employees who had arranged their own private stakeholder pensionplans. In turn, of this group of organisations, four per cent contributed themselves to these privateSHPs. Larger businesses, i.e. those with 50 or more employees, were most likely to make payrolldeductions and also to make contributions to private SHPs. Because of the small proportion oforganisations making contributions to privately arranged stakeholder pensions (three unweightedcases), typical contribution rates could not be estimated.

In addition to organisations providing access to stakeholder pensions, one per cent of organisations,which did not provide access to this type of pension, made payroll deductions on behalf of employeeswith private SHPs. This was equivalent to 0.7 per cent of all organisations. Of those not providingaccess to stakeholder pensions, but making payroll deduction for private stakeholder pensions, 13 percent also contributed to these pensions. This was equivalent to 0.1 per cent of all organisations andinvolved just four (unweighted) cases. Because of this small number, this very small group ofbusinesses was excluded from further analysis.


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3.4 Pension provision before stakeholder pensions

Organisations which offered access to one or more stakeholder scheme were asked whether they hadany other pension provision in place before introducing access to stakeholder pensions. Only 14 percent of organisations indicated that they had, but this rose to up to 42 per cent among businesses with500 or more employees (Table 3.6). In about one-third (32 per cent) of cases, organisations withprevious pension provisions had closed existing occupational and group pension schemes to newmembers or employees upon starting to provide access to stakeholder pensions. The closure of suchschemes was particularly likely among larger organisations: 46 per cent of businesses with 50 to 499employees and 45 per cent of businesses with 500 or more employees had closed occupational orgroup personal pension schemes while starting to provide access to stakeholder pensions.

Table 3.6 Other forms of provision before the stakeholder pensionscheme

5-49 50-499 500+ Total

(a)Organisation made other form of provision prior

to stakeholder pensions

Yes 12 25 42 14

No 86 73 58 84

Don’t Know 2 2 0 2



(b)Type of pension provision before stakeholder access

Via an occupational scheme that still admits new members 8 10 44 10

Via an occupational scheme that is now closed to new members 9 18 29 11

Via a group personal pension scheme that employees can still join 54 41 16 51

Via a group personal pension scheme that employees cannot now join 20 28 16 21

Private personal pensions other than group personal pension 6 3 1 6

Don’t know 1 0 0 1

Other 2 5 11 3



Base are (a) organisations with more than two stakeholder pension schemes and (b) organisations with more than two

stakeholder pension schemes and previous provisions. Totals include all organisations, i.e. also those with one to four

employees.


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4 Changes to pensionprovision

4.1 Introduction

In this section, we describe recent and anticipated changes to pension provision, drawing both oncomparisons with results from previous surveys and on information about changes collected in the2003 survey. As noted in Chapter 2, the 2000 and the 2003 surveys of employers’ pension provisiondiffered from previous surveys in that the former used the Inter-Department Business Register (IDBR)as their sampling base, whereas the latter relied on data provided by Dun and Bradstreet. This resultedin different sampling frames, as the IDBR captured more small organisations. In their report on the2000 survey, Smith and McKay (2001) already warned that caution must be applied when comparingsurvey data drawn from these two sampling frames, since, even after correction by weighting,differential coverage of organisations by the two sources may yet render comparisons misleading.However, the authors also pointed out that, when comparing the 1998 and the 2000 surveys, theyfound a high degree of correspondence between them, with the exception of higher proportions ofpart-time and female employees in the 2000 survey. They estimated that the increase in theproportion of part-time workers would have explained about one-quarter of the total change inpension coverage among firms with fewer than 20 employees. Similar tests using data from the 2000and 2003 employer survey data found that changes in the size distributions and changes in theproportions of part-time employees in businesses surveyed in 2003 explained very little of thedifference in pension provision between 2000 and 2003 (cp. Section 4.5).

Finally, as also remarked in Chapter 2, unlike the 1998 and 2003 surveys, which were conductedduring the spring of the respective years, the 2000 survey was undertaken in November andDecember of that year. As a result, the 2000 survey might have picked up more seasonal workers,who are frequently not members of pension schemes.

In Section 4.2, we make general comparisons of the last four surveys, but focus primarily oncomparisons with the 2000 survey. Unless stated otherwise, only findings of differences or changethat are statistically significant at the 95-per cent levels are reported. Section 4.3 reports employers’accounts of recent and planned changes to their pension provision. For organisations not currentlyproviding pensions, information was only available about planned changes.

Changes to pension provision

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4.2 Changes in the overall incidence of pension provision1996-2003

In Chapter 2 it was shown that, between 2000 and 2003, there was a substantial increase in theprovision of pension schemes, largely due to the introduction of the stakeholder pension. But therewere also changes in the provision of individual pension schemes, their potential coverage in terms ofthe proportion of employees working in pension-providing organisations and, albeit less markedly, inactive membership of pension schemes. The pattern of changes is shown in Table 4.1 and Table 4.2,which also distinguish between small (1-19 employees) and larger organisations (20+ employees).3

The key conclusions from Table 4.1, which excludes occupational pensions (reported in Table 4.2) are:

• There has been an increase, over time, in the proportion of organisations of both size groupsproviding GPPs, but a decline in the proportion of smaller businesses contributing to personalpensions, while the proportion of larger businesses contributing to personal pensions has fluctuatedbetween the years. Access to stakeholder pensions, not available in previous years, is now providedby 31 per cent of the smaller and 76 per cent of the larger organisations.

• Similarly, the proportion of employees working in organisations providing one or more of thesepension schemes has increased steadily and, for larger businesses, has now reached full coverage.Sixteen per cent of employees worked in smaller organisations, which contributed to personalpensions; 12 per cent in organisations which offered GPPs. Amongst the workforce of largerbusinesses, almost half of the employees worked in businesses providing GPPs, but only one-quarter in businesses contributing to personal pensions.

• Active membership of these schemes within smaller companies increased from 15 to 17 per centof employees being active members of one or another scheme in 2000 and 2003 (and, indeed,1998) and decreased in larger companies from 45 per cent in 2003 and 44 per cent in 2003.However, neither of these changes were statistically significant.

• Having risen between 1998 and 2000, active membership of GPPs remained at similar levelsbetween 2000 and 2003. Among smaller organisations, active membership of personal pensionschemes, to which employers contributed, declined from six per cent in 2000 to just one per centin 2003.

• Active membership of stakeholder pension schemes has reached four per cent of employees insmaller businesses and three per cent of employees in larger organisations. The emergence ofstakeholder pensions may, at least in part, explain the decline in smaller organisations contributingto personal pension plans.


3 The two size bands were used in previous reports on employers’ pension provisions because there was lessconfidence in the estimates for smaller companies in the 1996 and 1998 surveys. This was due to therepresentativeness of such companies on the sampling frame from which respondents were drawn.

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Table 4.1 Trends in overall pension incidence

Small organisations (1-19 employees) Larger organisations (20+ employees)

1996 1998 2000 2003 1996 1998 2000 2003

Organisations with:

Any provision 36 32 26 47 70 66 64 98

GPPs 6 4 7 9 19 26 37 41

PPs 20 21 16 14 27 30 23 27

Stakeholder pension - - - 31 - - - 76

Employees working for organisations with:

Any provision 42 38 30 64 90 89 89 99

GPPs 11 7 10 12 16 23 35 45

PPs 22 23 16 16 18 21 20 27

Stakeholder pension - - * 48 - - - 69

Active members as percentage of all employees:

Any provision 21 15 15 15 43 43 45 44

GPPs 5 3 5 6 3 5 10 9

PPs 8 8 6 1 1 2 2 1

Stakeholder pension - - - 4 - - - 3


Unweighted base (organisations) 780 631 566 473 1050 1111 1411 1529

Base: all organisations. * Less than 0.5 per cent, but more than zero.

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4.2.1 Changes in pension provision: detailed picture for organisations

In the following three tables we have added information about the different types of occupationalschemes provided by employers, looking, in turn, at the proportion of organisations providing these,the potential coverage and active membership of schemes.

Turning first to the proportion of organisations, which provided pension schemes, there was anincrease in the proportion of larger business providing some kind of occupational pension (27 percent, up from 22 per cent in 2000), while the proportion of smaller businesses providing theseschemes remained unchanged (five per cent) (Table 4.2).


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Table 4.2 Pension provision by size of organisation, 1996, 1998, 2000 and 2003

Cell percentages

1996 1998 2000 2003

Type of pension provision 1- 19 20+ 1- 19 20+ 1-19 20+ 1-19 20+

Occupational scheme (any) N/A N/A N/A N/A 5 22 5 27

Salary-related (open or closed) 3 19 2 13 1 12 2 14

Open salary-related schemes only N/A N/A N/A N/A 1 11 2 8

Money purchase (open or closed) 2 13 3 10 2 9 3 15

Open money-purchase schemes only N/A N/A N/A N/A * 8 2 9

COMBS - - 0 1 * 1 * 1

Top Hat 6 8 3 10 3 6 3 6

Other 0 0 0 * 0 1 1 1

Closed occupational scheme 1 6 1 5 2 5 3 8

GPP 6 19 4 26 7 37 9 41

Contributions to personal pensions 20 27 21 30 16 23 14 27

Access to stakeholder pensions1 - - - - - - 31 76

Access and Contribution to stakeholder pensions1 - - - - - - 4 15

Any provision 36 70 32 66 26 64 47 98

No provision 64 30 68 34 74 36 53 2

Weighted base (all) 927 71 1838 123 1823 154 1814 188

Unweighted base (all) 668 1179 635 1326 566 1411 473 1529

Base: all organisations. Notes: N/A = information not available from published reports. * = Less than 0.5 per cent, but more than zero.

COMBS schemes (Contracted-out on a mixed benefit basis) were not available until April 1997. Top Hat schemes are those set up for senior managers or only currently available to senior

management. Stakeholder pension schemes were not available until 8 October 2001.1 Only stakeholder pensions, which companies offered access to (i.e. excluding stakeholder pensions joint privately by employees).

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Both the provision of salary-related and money-purchase schemes rose for smaller and for largerbusinesses (however only the increase from nine per cent to 15 per cent among larger employersproviding money-purchase schemes was statistically significant). These statistics include all occupationalschemes, including closed and frozen schemes. As Table 4.2 indicated, there was, in fact, an increasein the proportion of organisations maintaining closed occupational schemes no longer open to newmembers, rising from two per cent to three per cent among smaller businesses (although this is notstatistically significant) and from five per cent to eight per cent among larger organisations between2000 and 2003.

If, therefore, only open salary-related schemes are taken into account, the proportion of smallerbusinesses providing these rose between 2000 and 2003 from one per cent to two per cent (this is notstatistically significant), but declined for larger businesses from 11 per cent to eight per cent. Theproportion of businesses providing money-purchase schemes indicated a rise for both smaller andlarger organisations, but neither of these changes was statistically significant.

There was no change in the provision of combined salary-related and money-purchase schemes(COMBS) or any other schemes. The proportion of larger or smaller organisations providing Top Hatschemes for senior or executive management remained unchanged (six per cent and three per centrespectively).

Money-purchase schemes

As noted in the previous section, the proportion of organisations providing money-purchaseoccupational schemes increased between 2000 and 2003, as did the provision of open money-purchase schemes (Table 4.2). However, the increase in open schemes of this type was proportionatelyless than the increase in all money-purchase schemes. It was likely that this reflected an increase in theclosure of this type of scheme.

Further analysis revealed that 14 per cent of all money-purchase schemes had been opened in 2000and in following years, compared to nine per cent opened between 1995 and 1999 and 26 per centbetween 1990 and 1994. The remainder (50 per cent) had been opened prior to 1990.

Overall, 42 per cent of all money-purchase schemes were open to new members and also receivedcontributions from employers. Among money-purchase schemes opened in 2000 or later, that is,approximately since the last Employers Pension Provision survey, just over half (55 per cent) were stillopen to new members by the time of the 2003 survey. Thirty-three per cent of money-purchaseschemes opened since 2000 and subsequently closed had been closed in 2003 alone. A further oneper cent had been closed in 2000, 17 per cent in 2001 and six per cent in 2002. For the remainder (43per cent), the exact closure date could not be established.

Another way of looking at the incidence of closures of money-purchase schemes is to start with closedor frozen schemes and to investigate when these schemes had, in fact, been opened. In total, 22 percent of money-purchase schemes, which no longer admitted new members, had been closed orfrozen since 19994. The real proportion of scheme closures during the period between 1999 and2003, however, is likely to have been higher, as in nearly half of all cases (47 per cent of schemes), itwas, again, not possible to establish the exact date of their closure. Focusing only on those cases ofmoney-purchase schemes, which were known to have closed in the year 2000 or after, 46 per centhad also been opened during that same period.

4 Survey participants were able to indicate whether a scheme had been opened or closed ‘within the lastfour years’, if they were not certain about the date. This four-year span included the years 1999 to 2003,and 1999 is, in this instance, selected as the start of the observation period.


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These statistics suggest a high incidence of closures of money-purchase schemes, in particular ofschemes which had only recently been established. Many money-purchase schemes, therefore, hadbeen open to members for only a short period. However, small case numbers urge for caution and nofurther analysis of the types of schemes or of the organisations closing these schemes so shortly aftertheir opening could be undertaken. Nevertheless, Table 5.8 shows that of all closed money purchaseschemes, 99 per cent had between 1-19 active members, i.e. nearly all were very small.

4.2.2 Changes in pension provision among employees over time

A somewhat different pattern becomes apparent when we look at the potential coverage ofoccupational pension schemes among employees. Seven per cent of employees in smaller organisationsworked for businesses, which provided occupational pensions schemes, as did 67 per cent ofemployees in larger businesses which constitutes an increase of four percentage points since 2000(Table 4.3). No change was recorded for the potential coverage of employees in smaller businesses.Please note potential coverage at the employee level does not necessarily mean all employees haveaccess to each type of provision that a company offers. It simply means they work for a company thatmakes such provision.


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Table 4.3 Proportion of employees working for private-sector employers by type of provision, in 1996, 1998,2000 and 2003

Cell percentages

1996 1998 2000 2003



Salary-related (open or closed) 5 60 2 50 3 53 2 54

Open SR schemes only N/A N/A N/A N/A 2 48 2 41

Money purchase (open or closed) 3 20 4 21 2 21 4 30

Open MP schemes only N/A N/A N/A N/A 1 20 2 26

COMBS - - 0 6 1 8 1 6

Top Hat 6 16 5 15 4 13 5 13

Other 0 0 0 1 0 2 1 0

Closed scheme 2 12 2 12 2 12 4 34

GPP 11 16 7 23 10 35 12 45


Access to stakeholder pension1 - - - - - - 48 69

Access and Contributions to stakeholder pensions1 - - - - - - 5 22

Any provision 42 90 38 89 30 89 64 100

No provision 58 10 62 11 70 11 36 0

Weighted base (all) 926 71 1830 122 555 1422 434 1568


Notes: N/A = information not available from published reports. SR = salary-related. MP = money-purchase. Organisations could have more than one scheme. COMBS schemes (Contracted-out on a

mixed benefit basis) were not available until April 1997. Top Hat schemes are those set up for senior managers or only currently available to senior management. Stakeholder pension schemes were

not available until 8 October 2001.1 Only stakeholder pensions which companies offered access to (i.e. excluding stakeholder pensions joined privately by employees).

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The small decrease, since 2000, in the proportion of employees in smaller businesses, whoseemployers provided salary-related occupational pensions (and the small increase among largerbusinesses) was not statistically significant. On the other hand, the proportion of employees inorganisations which provided money-purchase occupational pensions increased in both smaller(borderline significance) and larger businesses.

Focusing solely on open salary-related and open money-purchase schemes, however, it is apparentthat the potential coverage of the former decreased among larger businesses from 48 per cent in2000 to 41 per cent in 2003, while there was no change among smaller businesses. On the otherhand, the potential coverage of money-purchase schemes increased among larger organisations,from 20 per cent to 26 per cent (the change among smaller companies, from one per cent to two percent, was not statistically significant).

The proportion of employees working in organisations with 20 or more employees that provide GPPsor contribute to personal pensions increased between 2000 and 2003. The small changes to thesetypes of provision among those working for smaller businesses were not statistically significant.

The proportion of employees working in organisations that provided (access to) stakeholder pensionswas 48 per cent among smaller businesses and 69 per cent among larger organisations (comparedwith, at the employer level, 31 per cent of smaller organisations and 76 per cent of larger enterprisesproviding (access to) this pension).

4.2.3 Active membership among employees

Active membership of occupational schemes declined from 33 per cent of the workforce in 2000 to31 per cent in 2003 among larger business, although this change was not statistically significant(Table 4.4). It remained unchanged among smaller organisation, at three per cent. Few substantialchanges in active membership occurred between 2000 and 2003. Changes that did occur werelargely confined to larger businesses (20 or more employees), in which membership of salary-relatedschemes decreased (from 26 per cent to 23 per cent of the total workforce in 2003, although this wasof borderline significance), while membership of closed schemes substantially increased, from twoper cent of the workforce in 2000 to seven per cent in 2003.

While there were no differences between the active membership of all and only open money-purchase schemes, the decline in the active membership of salary-related schemes among largerbusinesses was even more apparent among open schemes. Between 2000 and 2003, activemembership of open salary-related schemes in organisations with 20 or more employees declinedfrom 24 per cent of the private-sector workforce to 16 per cent. Membership of open money-purchase schemes remained unchanged.


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Table 4.4 Active members as a percentage of the private-sector workforce by size of organisation, 1996, 1998,2000 and 2003

1996 1998 2000 2003



Salary-related 3 31 1 24 2 26 2 23

Open salary-related schemes N/A N/A N/A N/A 1 24 2 16

Money purchase 2 5 2 5 1 6 1 6

Open money-purchase schemes N/A N/A N/A N/A 1 6 1 6

COMBS - 0 0 3 * 3 1 2

Top Hat 3 1 1 * * * * *

Other 0 0 * 0 0 1 * 2

Closed scheme 1 2 1 2 1 2 1 7

GPP 5 3 3 5 5 10 6 9


Access to stakeholder pension1 - - - - - - 4 3

Any provision 21 43 15 43 15 45 17 44

No provision 79 57 85 57 85 55 83 56

Weighted base (all)2 926 71 1830 122 555 1422 434 1568


Notes: N/A = information not available from published reports. SR = salary-related. MR = money purchase. Organisations could have more than one scheme. COMBS schemes (Contracted-out

mixed benefit schemes) were not available until April 1997. Top Hat schemes are those set up for senior managers or only currently available to senior management. Stakeholder pension schemes

were not available until 8 October 2001.

* = Less than 0.5 per cent, but more than zero1 Only stakeholder pensions which companies offered access to (i.e. excluding stakeholder pensions joined privately by employees).2 The 1996 and 1998 surveys quote the same weighted base, whether the table is about organisations or numbers of employees. In 2000, the employee weights have been re-scaled to indicate

the numbers of employees involved. However, the weighted numbers earlier in the chapter (Tables 4.1 and 4.2) are based on identical approaches.

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In total, 17 per cent of employees of smaller businesses and 44 per cent of employees of largerbusinesses were members of some type of pension scheme provided or supported by their employers(the comparable figures in 2000 were 15 per cent and 45 per cent; neither of these small changeswere statistically significant).

4.3 Changes to pension provision

This section reports employers’ responses to a set of questions in the 2003 survey about recent andplanned changes to their pension provision.

4.3.1 Anticipated changes among non-providers

Seventeen per cent of non-providers said they had seriously considered introducing some form ofpension for their employees within the next five years or later (Table 4.5). Just over half of theseconsidered introducing pension provisions within the next five years. Non-providing organisationswith over five employees were more likely to have considered the introduction of a pension scheme(34 per cent) than smaller organisations (16 per cent).

Table 4.5 ‘To your knowledge, has this organisation seriouslyconsidered introducing some form of pension provision forits employees?’

Column percentages


1-4 5+ All

Yes, move expected in next five years 8 23 9

Yes, but move not expected in next five years 8 11 8

No 83 66 81

Don’t know 2 0 2



Base is organisations that have no pension provision for employees.

In comparison to the 2000 Employers’ Pension Provision Survey, the proportion of non-providers whoconsidered the introduction of some kind of pension in the future had fallen by about one-half (from32 per cent in 2000 to 17 per cent in 2003). After the introduction of the stakeholder pension, whichsignificantly increased the proportion of organisations with some form of pension or pension accessprovision, these statistics suggest that further increases in the provision of any pension scheme arelikely to be small. Moreover, they may be increasingly more difficult to achieve if, among theremaining non-providers, the proportion of organisations not considering new pension provisionscontinues to grow over time.

4.3.2 Recent changes among providers

In addition to asking non-providers about their planned changes, the Employers’ Pension ProvisionSurvey asked providers about changes to their pension provision since the last survey of this kind wasconducted in 2000. In Tables 4.6 and 4.7, responses are presented for businesses with five or moreemployees, which are required to make some type of pension provision available to their employees.Smaller businesses were excluded because of their small numbers (46 unweighted cases) and their


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simultaneously strong impact on the overall response distribution due to their high weighting in theanalysis.

Among companies with five or more employees, fewer than one in eight businesses providingpension schemes (12 per cent) had made no changes to their provision, while 82 per cent said they hadintroduced a stakeholder pension (Table 4.6). Organisations with up to 49 employees were morelikely to have started to provide access to stakeholder pension than larger organisations were. Overall,14 per cent of organisations had either introduced new arrangements: occupational scheme (threeper cent), a new GPP (six per cent) or started to contribute to personal pensions (five per cent). Thelargest businesses (500+ employees) were most likely to have introduced a new or an additionaloccupational scheme, while businesses with 20 or more employees were more likely to haveintroduced a new or additional GPP than business with fewer employees.


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Table 4.6 Recent changes to pension provision among current providers (from 2000 onwards) by size of organisation

Cell percentages

Size of the organisation (number of employees)

5-12 13-19 20-49 50-99 100-499 500-999 1000+ All

No new or additional provision 12 12 6 20 24 29 20 12

New occupational scheme 3 3 3 3 1 3 16 3

Additional occupational scheme 0 1 * 3 2 6 5 *

New GPP 4 3 10 18 17 16 9 6

Additional GPP 1 * 1 0 3 2 2 1

Started contributing to PPs 5 2 8 4 9 9 5 5

Access to stakeholder pension 83 85 87 65 65 63 63 82

Closed occupational scheme 2 2 2 11 13 27 32 3

Weighted base 352 100 108 38 30 4 4 638

Unweighted base 190 115 276 209 427 197 406 1820

Base is organisations with five or more employees that have some type of pension provision (occupational scheme, GPP or contributes to personal pensions). Organisations could have made more

than one type of change so columns do not sum to 100. Notes: Figures in brackets have an unweighted base of less than 50 cases. * = Less than 0.5 per cent, but more than zero.

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Three per cent of providers, with five or more employees, had closed an occupational scheme. Theproportion of organisations which had done so, increased from just two per cent of businesses withup to 49 employees, to 11 per cent of businesses with 50-99 employees. It was highest among thelargest organisations (1000+ employees), 32 per cent of which had closed occupational pensionschemes.

There were some differences in changes in pension provision among providing organisations (withfive or more employees), which had been operating for different lengths of time (Table 4.7). The maindifferences concerned organisations founded within the last four years and all other organisations.Only one per cent of organisations established in the last four years had introduced no new forms ofprovision since 1998 (compared to 12 per cent overall); they were particularly likely to have startedcontributing to personal pensions (16 per cent).

Table 4.7 Recent changes to pension provision among currentproviders (from 1998 onwards) by age of organisation

Cell percentages

Number of years organisation has been operating

1-4 years 5-10 years 11-19 years 20+ years All

No new provision 1 9 15 15 12

New occupational scheme 4 4 1 3 3

Additional occupational scheme 0 * * 1 *

New GPP 10 8 5 5 6

Additional GPP * 2 1 1 1

Started contributing to PPs 16 3 2 5 5

Access to stakeholder pension 88 85 81 79 81

Closed occupational scheme 3 1 1 5 3

Weighted base 65 129 155 284 633

Unweighted base 99 231 342 1133 1805

Base is organisations with five or more employees that have some type of pension provision (occupational scheme, GPP

or contributes to personal pensions). Organisations could have made more than one type of change so columns do not

sum to 100.

*= Less than 0.5 per cent, but more than zero. Note: Figures in brackets have a base of less than 50 cases.

Recent changes to occupational pensions

Few providers of occupational pensions reported any specific changes to these schemes since 2000(Table 4.8). Four per cent had changed from being contracted-out of S2P to being contracted-in. Oneper cent had switched in the other direction. These figures were slightly lower than in 2000, when fiveper cent of organisations had contracted into S2P and two per cent contracted out of SERPS (Smithand McKay, 2000, p. 54). These decreases, however, were not statistically significant.


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Table 4.8 Changes to occupational schemes among current providers

Column percentages

Have any of your occupational schemes changed from:

Salary-related Contracted-out Contracted-in

Money purchase to money of S2P to to contracted-out

to salary-related? purchase? contracted-in? of S2P?

Yes * 4 4 1

No 99 94 92 96




Base is current providers of occupational schemes. * Less than 0.5 per cent, but more than zero.

There was also some change in the proportion of providers who had changed the basis of thecalculation of their benefits. Four per cent of providers had switched a salary-based occupationalscheme to a money-purchase scheme, while less than 0.5 per cent moved from money-purchase tosalary-related schemes. In 2000, the respective figures were two per cent and one per cent. However,unlike in the previous survey, providers participating in the 2003 survey appeared much clearer abouttheir recent changes to occupational pensions, resulting in a much lower rate of ‘don’t know’responses. Comparisons with the 2000 statistics should, therefore, be treated with caution, as theactual proportion of organisations, which had changed their occupational pension schemes, might, infact, have been higher or lower in 2000 than was then reported.

4.3.3 Anticipated changes among providers

Providers who did not have a GPP plan were asked if they had ‘ever seriously’ considered setting up aGPP for their workforce (Table 4.9). Ten per cent of organisations with 20 or more employees said thatthey had considered this, as did two per cent of smaller businesses.


64

Table 4.9 Anticipated changes to pension provision by size oforganisation

Column percentages

Has this organisation ever seriously considered:

Contributing to

employee personal

Moving to a Group pension plans to Moving to a

Personal Pension? replace current Stakeholder pension

arrangement1 provision2? arrangement3?

Number of Number of Number of

employees employees employees

1-19 20+ All 1-19 20+ All 1-19 20+ All

Yes 2 10 3 5 6 5 14 25 15

No 98 89 97 95 93 95 86 72 84

Don’t know * 1 * 0 * * 0 3 *

Weighted base 694 107 801 614 134 748 304 42 345

Unweighted base 273 867 1140 283 119 1402 67 456 523

Notes: Base 1 is organisations with some pension provision but not a GPP.

Base 2 is organisations with some pension provision but were not contributing to employees’ personal pension plans.

Base 3 is organisations with some pension provision but not a stakeholder pension. * Less than 0.5 per cent, but more

than zero.

Similarly, organisations not contributing to employees’ personal pension plans were asked whetherthey had considered replacing their current provision with personal pension contributions (Table 4.9).Six per cent of larger businesses and five per cent of smaller businesses indicated that they hadconsidered this change.

Finally, organisations not providing (access to) stakeholder pensions were asked whether they hadconsidered their introduction. In total, one in six organisations said they had, with the proportionrising to one in four among businesses with 20 or more employees.

Organisations already providing (access to) stakeholder pensions and contributing to personalpensions were most likely to have considered moving to GPPs (nine per cent), as were those alreadyproviding GPPs together with (access to) stakeholder pensions and occupational pensions (seven percent) (Table 4.10). The option to replace current pension provisions with contributions to personalpension plans had, above all, been considered by providers of (access to) stakeholder pensions (sevenper cent) and providers of occupational pensions and (access to) stakeholder pensions (five per cent).


65

Table 4.10 Anticipated changes to pension provision by current type of provision

Column percentages

Has this organisation ever

seriously considered: Current pension provision

Moving to a Group Occupational Stakeholder,

Personal Pension Occupational Occupational and Stakeholder occupational

arangement1? Scheme PP Stakeholder and PP Stakeholder and PP and GPP Total

Yes 5 [1] 3 [9] 1 9 7 3

No 94 [22] 97 [17] 99 90 92 97

Don’t know 2 [1] * [1] * 1 1 *

Weighted base 32 154 455 5 67 83 5 801

Unweighted base 209 24 439 27 246 130 65 1140

Contributing to

employee personal Occupational Stakeholder,

pension plans to replace Occupational Occupational and Stakeholder Occupational

current provision2? Scheme GPP Stakeholder and GPP Stakeholder and GPP and GPP Total

Yes 1 3 7 1 5 1 5 5

No 99 97 93 97 95 99 95 95

Don’t know 0 * * 2 0 * 0 *

Weighted base 32 120 455 8 67 55 12 748

Unweighted base 209 129 439 66 246 209 104 1402

Moving to a Stakeholder Occupational Occupational Occupational GPP and Occupational,

pension arrangement3? Scheme GPP PP and GPP and PP PP PP and GPP Total

Yes 6 16 [6] 22 [6] [6] [10] 15

No 93 84 [17] 71 [21] [37] [14] 84

Don’t know 2 0 [1] 7 [0] [1] [0] *

Weighted base 32 120 154 8 5 25 2 345

Unweighted base 209 129 24 66 27 44 24 523

Notes: Base 1 is organisations with some pension provision but not a GPP.

Base 2 is organisations with some pension provision but were not contributing to employees’ personal pension plans.

Base 3 is organisations with some pension provision but not access to a stakeholder pension.

Figures in [ ] based on fewer than 50 cases and report absolute frequencies; they should therefore be treated with caution.

* = Less than 0.5 per cent, but more than zero.

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66

Finally, the share of organisations which had contemplated moving to stakeholder pensions, rangedfrom six per cent of organisations providing only occupational pension schemes, 16 per cent ofbusinesses providing GPPs and 22 per cent of employers contributing to personal pensions. Thepercentage figures for other providers were based on less than 50 (unweighted) observations andmust be treated with caution.

Providers of any of the four main types of pensions and those with closed or frozen occupationalpension schemes were next asked if their organisations had seriously considered making any changesin the next two years. Overall, organisations that had contemplated such changes were more likely tohave considered making changes to existing provisions rather than introducing new schemes orclosing others, which would change the mix of their provision (Table 4.11). Thirty-one per cent oforganisations had considered improving their benefits within the next two years, while 25 per centhad considered setting up a Top Hat scheme.

Table 4.11 Anticipated changes to pension provision over next twoyears

Cell percentages

Anticipated changes All

Change type of provision

Introduce/change to stakeholder pension 10

Introduce/change to GPP 3

Introduce/change to money purchase scheme 1

Set up a new scheme (undefined) 15

Close scheme and set up new provision (undefined) 3

Intend to close defined benefit (salary-related) scheme 1

Change existing provision

Open up eligibility rules to allow more employees to join 1

Restricting entry *

Improve benefits 31

Reducing benefits 1

Rationalise/merge schemes *

Reduction/change in accrual 1

Equalisation of pension ages *

Increase contributions 8

Increase employees’/members’ contributions 1

Contract out of S2P *

Contract in to S2P *

Set up Top Hat scheme 25

Do not know 1

Other 3

Weighted base 96

Unweighted base 325

Base is current providers who thought they would be making changes in the next two years.

Note: * = Less than 0.5 per cent, but more than zero. Respondents could give up to five answers so columns do not

sum to 100.

Among changes to the type of provision, 15 per cent of organisations indicated they had consideredsetting up a new, as yet unspecified, pension scheme in the next two years, ten per cent consideredintroducing a stakeholder pension and three per cent introducing a GPP (Table 4.11).


67

Three per cent of organisations had considered closing a scheme and setting up a new provision. Oneper cent of businesses had considered closing their salary-related (or defined benefit) scheme,although this rose to three per cent among organisations with 20 or more employees. One per cent oforganisations also considered the introduction of, or change to, a money-purchase scheme.

The responses were not mutually exclusive and some organisations might have had plans for morethan one change to their current system of pension provision.

4.4 Attributing changes in incidence of provision

It was noted earlier in this chapter and in Chapter 2 that there had been some changes in thecharacteristics of organisations surveyed in 2000 and 2003 and in the characteristics of theirworkforce. These changes might have been due to the wider sampling frame used in the 2003 survey,now also including businesses with just one employee, due to actually occurring changes in the labourmarket, or due to sampling error. These changes may affect the aggregate survey results, which havebeen reported here, as the level and extent of pension provision varies between businesses withdifferent workforce characteristics.

The main differences were in the proportion of smaller businesses, which increased for the smallestsize band and decreased for organisations with six to 12 employees, and in the proportion of part-timeemployees. There was a slight increase in the proportion of organisations without part-timeemployees and a large decrease in the proportion of organisations with between 50 per cent and 75per cent of their workforce employed on a part-time basis.

The effect that these changes might have had on the aggregate estimate of the proportion oforganisations with pension provision can be estimated using shift-share analysis. This techniqueisolates the impact of compositional changes and behavioural changes (in terms of pension provision)among businesses, and also calculates the interaction between the two values. Shift-share analysiswas used in the 2000 survey when comparisons were drawn with the 1998 survey (cp. Smith andMcKay, 2001, pp. 57-60). This exercise was repeated for the present study and the results of two ofthe shift-share analyses are reported now.

The first shift-share analysis estimated the effect of changes in the number of employees or, moreprecisely, the distribution of organisations across different size bands on the level of pension provision(Table 4.12). Total coverage increased by 27 percentage points between 2000 and 2003. The shift-share analysis suggests that, had the size composition of organisations, in fact, remained unchanged,this would have led to a 0.03 percentage point drop in the provision of pensions in Britain. Over 23percentage points of the change were due to actual changes in behaviour, which, therefore,accounted for almost all the observed change in provision.


68

Table 4.12 Pension provision by number of employees

1998 2000 2003

Percentage Provision Percentage Provision Percentage Provision

Size band of firms level of firms level of firms level

1-5 64 25 72 24 75 36

6-12 31 42 22 25 19 78

13-19 5 57 6 47 6 95

All sizes 100 32 100 26 100 47

Element Element due

Aggregate due to to change

change change in in behaviour Interaction

2000-2003 composition within groups term

+27% -0.03 +23.2 -1.2

Base: firms with fewer than 20 employees.

Note: Provision includes the option “providing access to stakeholder pensions” even when there are no contributions.

Similarly, changes in the proportion of businesses with part-time workers had only a very small effecton the aggregate change in provision: had the composition of businesses in 2003 remained as in2000, a 0.2 percentage point drop in total provision would have been expected (Table 4.13). Bycontrast, 21.5 percentage points of the observed change can be attributed to changes in organisations’behaviour, thus again accounting for most of the actual increase in provision.

Table 4.13 Pension provision by number of part-time employees

1998 2000 2003

Percentage Provision Percentage Provision Percentage Provision

Size band of firms level of firms level of firms level

None 46 32 38 29 41 44

0.1% - 24.9% 13 46 9 42 8 86

25% - 49.9% 15 39 16 24 20 59

50% - 74.9% 15 26 26 23 19 43

75% - 100% 11 11 12 9 12 18

All sizes 100 32 100 26 100 47

Element Element due

Aggregate due to to change

change change in in behaviour Interaction

2000-2003 composition within groups term

+27 -0.2 +21.5 +0.01

Base: firms with fewer than 20 employees.

Note: Provision includes the option “providing access to stakeholder pensions” even when there are no contributions.

Very similar results were found in tests for the effect of changing age profiles and distribution acrossindustrial sectors. Overall, therefore, it was behavioural changes rather than changes in thecomposition of businesses or their workforce, which drove changes in pension provision between2000 and 2003.


69Occupational pensions

5 Occupational pensions

5.1 Introduction

This chapter examines occupational pension schemes provided by private-sector employers in Britain.It starts with a review of the characteristics of employers providing these pensions before moving onto explore the membership of occupational schemes and the type and level of contributions made byemployers to these pensions. Scheme valuations will also be analysed. The following Chapter 6 willexplore the administration of pension schemes.

5.2 Occupational pension providers

Initial analysis of pension provisions among employers in 2003, reported in Chapter 2, revealed that,as in 2000, seven per cent of employers provided occupational pensions for their employees. Theprovision of occupational pensions strongly depended on the size of the business, as few smallerenterprises offered these schemes, while over 80 per cent of the largest businesses (1000+employees) covered in the 2003 survey provided occupational pensions.

About one-quarter of all businesses (26 per cent) with occupational pension schemes provided onlythese, the remainder offered occupational pensions alongside other pension products, including overhalf of these organisations (52 per cent) providing both an occupational pension scheme and (accessto) a stakeholder pension (Table 5.1). Smaller businesses with up to 99 employees were most likely toprovide this combination of pension products (56 per cent), while larger businesses tended to provideoccupational pension schemes alongside access to stakeholder pensions or alongside stakeholderpensions and GPPs. Sixteen per cent of the very largest businesses (with 1000 or more employees)provided occupational pensions and GPPs.

70O

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Table 5.1 Occupational pension arrangements by size of organisation

Column percentages

Size of the organisation (number of employees)

Occupational pension arrangements 1-99 100-499 500-999 1000+ All

Type of provision

Occupational scheme only 24 39 36 23 26

Occupational and GPP 4 8 8 16 5

Occupational and PP 4 4 2 1 4

Occupational and stakeholder 56 19 23 20 52

Stakeholder, occupational and GPP 10 17 20 29 11

Occupational, PP and GPP 1 3 0 2 1

Four schemes 1 10 12 9 2

Number of occupational schemes

1 occupational scheme 73 60 70 52 71

2 occupational schemes 26 35 24 22 27

3 – 6 occupational schemes 1 6 6 26 2

Active members of occupational schemes as a % of all employees

Up to 25% 45 35 25 39 44

26 – 50% 28 18 29 20 27

51 – 75% 7 26 27 15 9

76 – 100% 21 21 19 26 21

Number of employees in occupational schemes

1-49 99 36 17 19 89

50-99 1 34 2 2 4

100-249 0 24 27 7 3

250-499 0 6 33 11 2

500-999 0 * 20 15 1

1000-4999 0 0 1 36 1

5000+ 0 0 0 11 *

Weighted base 111 10 3 4 127

Unweighted base 115 194 125 339 773

Base is organisations with an open or closed occupational scheme obtained from the Occupational database.


71

The majority of employers restricted their provision of occupational pensions to a single scheme (71per cent). However, just over a quarter (26 per cent) of organisations with 1000 or more employeesprovided three or more occupational pensions.

Just under one-third (30 per cent) of employers providing occupational pensions had more than 50per cent of their employees as active members of the scheme, although this figure rose to more than40 per cent among businesses with 100 or more employees and was highest among businesses with100-499 employees (47 per cent).

5.3 Occupational pension schemes

Organisations managed open, closed and frozen occupational pension schemes.

Open schemes admit new members as well as receive continued contributions by current members.Closed schemes do not admit new members, but current members continue to contribute to thescheme. Finally, frozen schemes are closed to both new and current members and no morecontributions can be made to this type of occupational pension scheme. The provision of all threetypes of occupational pensions tended to increase with the size of the business.

5.3.1 Size of schemes

Fifty-six per cent of occupational schemes in private-sector organisations were open schemes, 33 percent were closed and 11 per cent were frozen. Closed and frozen schemes tended to be smaller in sizethan open schemes, covering or affecting fewer employees (Table 5.2). Just eight per cent of closedschemes and four per cent of frozen schemes had 20 or more active members, compared to 24 percent of open schemes. While about half (53 per cent) of all open occupational schemes were providedby organisations with up to 12 employees, 67 per cent of closed schemes were held in organisation ofthis size. By contrast, just three per cent of these smaller businesses managed frozen schemes, while65 per cent of frozen schemes were found among businesses with between 20 and 49 employees.This was also in marked contrast to the findings of the 2000 survey, when nearly all (94 per cent) offrozen schemes were in organisations with up to five employees (Smith and McKay, 2001, p. 63).

Occupational pensions

72

Table 5.2 Size of occupational pension schemes

Column percentages

Type of occupational scheme

Open Closed Frozen

Size of scheme

No active members 13 * 55

1-19 active members 63 92 40



100-249 active members 3 1 *




5000+ active members * * 0

Median number of (active) members 2 1 0


1 - 4 employees 43 30 0

5 – 12 employees 10 37 3

13 – 19 employees 11 5 6

20 – 49 employees 14 5 65

50 – 99 employees 7 9 13

100 – 499 employees 8 7 13

500 – 999 employees 2 2 3

1000+ employees 5 4 3



Base is all occupational schemes. Note: * = Less than 0.5 per cent, but more than zero.

The size of occupational schemes, as measured by their number of active members, increased withthe size of the providing organisation (Table 5.3).

Table 5.3 Relationship between size of scheme and size of organisation

Column percentages

Size of scheme (number of active members)

Size of organisation 1-19 20-49 50-99 100-249 250-499 500-999 1000+ All

1 – 19 employees 77 - - - - - - 64

20 – 49 employees 11 38 - - - - - 12

50 – 99 employees 7 34 22 - - - - 9

100 – 499 employees 4 19 65 56 25 1 - 8

500 – 999 employees * 5 7 25 41 37 1 2

1000+ employees 1 3 6 19 33 62 99 4

Weighted base 131 14 5 4 2 1 2 160

Unweighted base 305 122 107 164 164 132 253 1247

Base is all occupational schemes with at least one member. Notes: * = Less than 0.5 per cent, but more than zero.

- = not applicable.


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5.3.2 Closed and frozen schemes

For a large proportion of closed or frozen occupational schemes, the surveyed organisations could nolonger recall when exactly these had been closed or frozen. This included 28 per cent of schemes,where the survey informant thought it might have been closed more than four years ago, i.e. before1999 (Table 5.4), but was not sure about the exact year. Similarly, with respect to 59 per cent of frozenschemes, the interviewee believed that it had been closed to new and current members more thanfour years ago without recalling the exact year.

Table 5.4 Year of scheme closure or freezing

Column percentages


Year closed Closed Frozen

1999 6 8

2000 2 2

2001 12 18

2002 3 2

2003 6 1

Don’t know exactly, but within last 4 years 2 5

Don’t know exactly, but over 4 years ago 28 59

Don’t know 43 5

Weighted base 69 20

Unweighted base 470 160

Base is all closed and frozen occupational schemes.


Further scheme closures occurred, in particular, in 2001, when 12 per cent of occupational schemeshad stopped accepting new members. Eighteen per cent of schemes had stopped acceptingcontributions from new and existing members in 2001.

Occupational pension schemes had mainly been closed within the last four years because they hadbeen intended for a small number of members, largely directors (55 per cent), because the schemehad become too expensive to run (18 per cent) or because the providing organisation wanted toswitch to providing access to a stakeholder pension (nine per cent) (Table 5.5, column 3).Occupational pension schemes were frozen within the last four years because organisations wantedto set up a new or different scheme (20 per cent), felt there were not enough members to sustain thescheme (21 per cent), were concerned about too much administration (12 per cent) or had thescheme intended for directors only (11 per cent). The principal reasons for the closure of salary-relatedschemes were costs (39 per cent) and the original intention to limit membership only to one or twopersons (28 per cent).


74

Table 5.5 Reasons for scheme closure to new members by type of scheme (within last four years)

Cell percentages


Closed

Reason why scheme closed to new members Salary-related schemes Money-purchase schemes All Frozen

Not enough money to meet liabilities 7 [0] 3 7

Scheme too expensive to run 39 [4] 18 5

Stock market conditions 2 [0] 1 0

Wanted to switch to group personal pension or personal pension 1 [5] 3 10

Wanted to switch to defined contribution (or money purchase) 2 [0] 1 *

Wanted to switch to a stakeholder pension scheme 8 [7] 9 10

Set up a new or other scheme (unspecified) 2 [5] 6 20

Recent/anticipated changes to pension legislation or tax 3 [0] 1 *

Recent changes to accounting practices 1 [1] 1 0

Change of ownership of organisation - organisation merged 11 [3] 6 4

Previous scheme was not attractive - wanted to provide better scheme 2 [0] 1 4

Not enough members/reduction in workforce 0 [2] 1 21

Only intended for one or two directors/one person 28 [10] 55 11

Too much administration 0 [0] 0 12

Don’t know 2 [0] 1 0

Other 8 [4] 4 5



Base is closed and frozen schemes that closed to new members in last four years.

Note: * = Less than 0.5 per cent, but more than zero. Respondents could give more than one answer so columns do not sum to 100. Base for salary-related and money-purchase closed schemes

smaller than for all closed schemes due to inclusion of ‘other’ schemes in the latter. Figures in [ ] have a base of less than 50 cases and report absolute frequencies.

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5.3.3 Types of occupational schemes

The benefits of occupational pension schemes can be calculated in two principal ways. First, salary-related schemes (also called defined benefit schemes) base the final pension on the contributor’searnings, typically as a fixed proportion of the latter just before retirement. Secondly, money-purchase schemes (or defined contribution schemes) base the pension on the contributions made tothe scheme and the return on the investment made with these contributions. Upon retirement, theoverall value of the pension fund is used to buy an annuity, from which pension is drawn.

Some occupational pension schemes combine salary-related and money-purchase features. Forinstance, pension scheme members can switch from a salary-related to a money-purchase scheme, ifthe latter’s annuity is greater than the salary-related pension (‘money-purchase underpin’). Othervariations include the ‘target pension arrangement’, under which employers top up money-purchaseschemes to guarantee an agreed target pension. Other schemes differ in relation to how they operatewith respect to SERPS (see Section 5.3.5) and in terms of membership restrictions (e.g. ‘Top Hat’schemes typically limited to senior managers; see Section 5.4.1).

The most common form of open, closed or frozen occupational pensions were money-purchaseschemes (Table 5.6, row 2). Only about a fifth of schemes were salary-related. Mixed schemes mainlyoperated as salary-related schemes made up 14 per cent of all open schemes. Other5 pensionarrangements constituted 15 per cent of all open schemes. Mixed pension products, mainly managedas money-purchase schemes, were much less prevalent (ranging from two to six per cent of schemes).

Table 5.6 Types of occupational pension schemes

Column percentages

Status of occupational scheme

Type of occupational scheme Open Closed Frozen All

Salary-related 22 22 25 22

Money purchase 47 58 64 53

Mixed, mainly salary-related 14 * * 8

Mixed, mainly money purchase 2 5 6 4

Other 15 14 5 14



Base is all occupational schemes.


Table 5.7 illustrates the percentage of active members that were in each type of scheme. Most activemembers in open schemes were in salary-related schemes (46 per cent), as were most active membersof closed schemes (81 per cent). Compared to 2000, active membership of open salary-relatedschemes declined from 57 per cent, whereas active membership of money-purchase schemesincreased from 15 per cent (Smith and McKay, 2001, p.67), although the latter increase is only ofborderline statistical significance.

In contrast, the majority of members who had previously contributed to now frozen schemesbelonged to money-purchase schemes (58 per cent).

5 Many of these ‘other’ schemes were Top Hat schemes. However, small baseline numbers prevent moredetailed analysis.


76

Table 5.7 Percentage of active members by type and status ofoccupational scheme

Column percentages

Status of occupational scheme

Type of occupational scheme Open Closed Frozen All

Salary-related 46 81 32 54

Money purchase 18 6 58 16

Mixed, mainly salary-related 21 10 0 18

Mixed, mainly money purchase 6 1 9 5

Other 8 2 1 7



Base is all occupational scheme members. Note: * = Less than 0.5 per cent, but more than zero.

Size of schemes

The majority of open salary-related (59 per cent) and money-purchase schemes (77 per cent) hadbetween one and 19 active members, whereas over two-thirds of ‘other’ open schemes, whichincludes mixed schemes, had no active members at all (Table 5.8). These differences were fairlysubstantial, as the statistics of the median number of active members highlights. Whereas half of allopen salary-related schemes had up to nine members, half of all open money-purchase schemes onlyhad one member. Half of all ‘other’ open schemes had no members, as the previous statistic in the tophalf of Table 5.8 suggested.

Table 5.8 Size of occupational pension schemes by type of scheme

Column percentages

Type and status of occupational scheme

Open schemes Closed schemes

Salary- Money Salary- Money

related purchase Other related purchase Other

Size of scheme

No active members * 6 69 * 0 [2]

1-19 active members 61 77 22 67 99 [8]

20-49 active members 26 6 1 7 1 [3]

50-99 active members 4 4 0 10 * [1]

100-249 active members 3 4 1 5 * [2]

250-499 active members 2 1 2 4 * [1]

500-999 active members 2 * 1 2 0 [3]

1000-4999 active members 2 1 2 3 * [1]

5000+ active members * * 1 * 0 [1]

Median number of active members 9 1 0 6 1 [37]

Continued


77

Table 5.8 Continued

Column percentages




related purchase Other related purchase Other


1 - 4 employees 45 45 53 0 44 [1]

5 – 12 employees 3 7 9 20 37 [2]

13 – 19 employees 12 10 13 0 8 [0]

20 – 49 employees 12 17 6 2 5 [1]

50 – 99 employees 13 5 1 36 2 [1]

100 – 499 employees 8 11 3 19 3 [2]

500 – 999 employees 2 2 2 8 1 [3]

1000+ employees 6 3 12 16 * [14]

Weighted base 34 47 15 15 48 6

Unweighted base 362 285 161 344 102 24

Base is all open and closed occupational schemes.

Notes: * = Less than 0.5 per cent, but more than zero. Figures in [ ] have a base of less than 50 cases and report

absolute frequencies.

Between 45 per cent and 53 per cent of open occupational schemes were provided by organisationswith up to four employees. Very large organisations with 1000 or more employees had adisproportionate share of ‘other’ open schemes (12 per cent), when compared to their shares of opensalary-related (six per cent) or open money-purchase schemes (three per cent).

Nearly all closed schemes (92 per cent) had fewer than 20 active members and over two-thirds ofthem (67 per cent) were in organisations with up to 12 employees (not shown in table). Closed salary-related and closed money-purchase schemes tended to be smaller in membership than theirrespective open schemes. In the case of salary-related schemes, however, the organisations withclosed schemes also tended to be larger than those with open schemes.

5.3.4 Age and industrial sector of occupational schemes

Over one-third of open salary-related schemes (40 per cent) had been set up before 1989, comparedto just one-fifth (20 per cent) of open money-purchase and six per cent of ‘other’ open occupationalschemes (Table 5.9). Nearly two-thirds of closed schemes (62 per cent) had been closed before 1989(not shown in table).


78

Table 5.9 Year that occupational scheme was set up by type of scheme

Column percentages



When was the Salary- Money Salary- Money

scheme established? related purchase Other related purchase Other All

Before 1981 25 6 5 31 55 [8] 27

1981 – 1984 8 7 * 2 2 [2] 5

1985 – 1988 7 7 1 18 14 [1] 9

1989 – 1991 1 3 3 1 5 [1] 3

1992 – 1994 2 48 * 3 * [0] 15

1995 – 1997 47 7 64 4 2 [1] 20

1998 – 2000 3 11 23 16 14 [4] 12

2001-2003 8 11 3 24 8 [1] 10

Weighted base 33 47 13 12 47 5 158

Unweighted base 335 275 98 318 97 18 1146

Base is all open and closed occupational schemes (not frozen). Notes: Figures in [ ] have a base of less than 50 cases

and report absolute frequencies..


However, in all instances, including that of closed schemes, there had been a more recent change inprovisions. In the case of open salary-related schemes, about half of these (47 per cent) had been setup between 1995 and 1997. In contrast, nearly half of open money-purchase schemes had beenestablished between 1992 and 1994 (48 per cent), while nearly two-thirds of other schemes had beenopened between 1995 and 1997 (64 per cent).

These statistics are affected by the inclusion of small occupational schemes (less than 20 members),many of which had been set up in more recent years. Excluding these, 44 per cent of open salary-related schemes (with 20 or more members) had been set up before 1981, as had 19 per cent of openmoney-purchase schemes and 58 per cent of other open occupational schemes. The proportion ofclosed larger schemes, which had been opened before 1981, remained close to the average at 49 percent.

Proportionately more closed than open salary-related and money-purchase schemes had been set upbefore 1981, including over half of all closed money-purchase schemes (56 per cent). This said, 41 percent of closed salary-related schemes and 22 per cent of closed money-purchase schemes hadstopped accepting members’ contributions after 1998.

Over a quarter of schemes set up since 1998 had replaced an earlier scheme (27 per cent), while sevenper cent added to an earlier scheme. Salary-related and money-purchase schemes were about equallylikely to have replaced an earlier scheme (26 per cent and 27 per cent respectively), although the latterwere more likely to have been an addition to an earlier scheme (four per cent compared to one percent of salary-related schemes). In all instances, respondents were often unsure whether schemeshad replaced or added to existing provisions: in the case of salary-related schemes, ‘don’t know’responses amounted to 13 per cent, in the case of money-purchase schemes to 19 per cent ofresponses.


79

The size of open or now closed occupational pension schemes tended to increase with the schemes’age. Whereas 57 per cent of schemes with between 500 and 999 or between 1000 and 4999 activemembers had been set up before 1981, this was only true for 26 per cent of schemes with one to 19active members (Table 5.10). Over two-thirds (69 per cent) of schemes with up to 19 members hadbeen set up since 1992, compared to 54 per cent of schemes with between 20 and 49 members or 12per cent of schemes with between 1000 and 4999 members.

Table 5.10 Year that occupational scheme was set up by size of scheme

Column percentages


When was the 100- 250- 500- 1000-

scheme established? 1-19 20-49 50-99 249 499 999 4999 5000+

Before 1981 26 26 60 39 41 57 57 39

1981 - 1984 3 1 6 2 2 8 2 4

1985 - 1988 9 12 8 19 12 7 14 27

1989 - 1991 3 4 1 4 7 3 11 0

1992 - 1994 19 3 4 7 4 13 4 4

1995 - 1997 17 27 4 6 10 4 4 12

1998 - 2000 13 1 12 19 11 7 7 15

2001 – 2003 10 25 6 5 12 1 1 0

Weighted base 117 12 5 4 2 1 2 1

Unweighted base 246 104 96 156 153 126 184 62

Base is open and closed occupational schemes with at least one member.

The retail, distribution, hotels and catering sector was the main contributor to occupational pensions,accounting for 47 per cent of open or closed occupational pensions in 2003 (Table 5.11). It alsoprovided a disproportionate share of all open money-purchase schemes (61 per cent), a share ofclosed schemes roughly equivalent to its overall share of pensions (49 per cent) and relatively feweropen salary-related schemes (41 per cent).

Table 5.11 Industrial sector (SIC 1992) of occupational schemes by typeof scheme

Column percentages


Open schemes

Salary- Money Closed

Industrial sector related purchase Other schemes All

Agriculture and fishing * * * * *

Energy and water * * * * *

Manufacturing 9 13 60 20 19

Construction 12 3 * 8 7

Retail, distribution, hotels and catering 41 61 7 49 47

Transport and communications 2 1 * 2 1

Banking, finance and business services 12 19 4 12 13

Public administration, education and health 22 2 17 3 8

Other services 3 1 10 7 5


Unweighted base 362 285 161 470 1278

Base is all open and closed occupational schemes. Note: * = Less than 0.5 per cent, but more than zero.


80

The main provider of money-purchase schemes after the retail sector was banking. Accounting for 13per cent of all occupational pension schemes, it also accounted for 19 per cent of all open money-purchase schemes.

The high proportion of schemes that appear to come from the retail, distribution, hotels and cateringsector can be explained by the fact that many of these are smaller companies (1-19 employees). Theweighting system used on this survey means that when employer level estimates are produced (i.e. foremployers of all sizes) smaller companies’ responses are boosted up in order to ensure the estimatereflects the whole population of employers (i.e. there are many small companies and the results at theemployer level need to reflect this). For example, when employers with 1-19 employees are removedfrom the analysis only three per cent of open salary-related schemes are located in this sector(compared with 41 per cent in Table 5.11), as are 22 per cent of ‘all’ occupational schemes (comparedwith 47 per cent).

Manufacturing was the main provider of ‘other’ types of occupational pensions. This sector alsoaccounted for large proportions and, in some cases, the majority of medium-sized and largeroccupational pension schemes (Table 5.12). However, the largest fraction of very large occupationalpension schemes (5000+ active members) were found in the banking, finance and business servicessector (41 per cent), which also provided over one-third of all smaller schemes with 20 to 49 activemembers (38 per cent) as did the education and health sector (37 per cent). The retail, distribution,hotel and catering sector was the main provider of very small schemes with 1-19 active members (59per cent).


81

Table 5.12 Industrial sector (SIC 1992) of occupational schemes by size ofscheme

Column percentages


100- 250- 500- 1000-

Industrial sector 1-19 20-49 50-99 249 499 999 4999 5000+

Agriculture and fishing * * 0 * * 0 0 0

Energy and water * * * 1 * 0 4 11

Manufacturing 12 13 48 55 48 50 38 22

Construction 9 1 6 3 1 3 7 7

Retail, distribution, hotels

and catering 59 5 4 8 15 16 2 7

Transport and communications 1 2 3 6 7 3 16 4

Banking, finance and business

services 10 38 32 22 11 17 22 41

Public administration, education

and health 5 37 1 4 17 5 4

Other services 4 3 5 2 1 6 6 7

Weighted base 123 14 5 4 2 1 2 1

Unweighted base 268 113 99 161 158 130 189 62

Base is open and closed occupational schemes with at least one member.


5.3.5 Reasons for scheme closures

In Section 5.3.2, the reasons for closing occupational pension schemes were reported and found todiffer between closed and frozen schemes. The reasons for the closure of occupational schemes alsovaried markedly between types of schemes, that is, between salary-related and money-purchaseschemes (Table 5.13). The principal reasons for closing salary-related schemes were their cost (32 percent), the original intention to limit access to one or two directors or other (senior) persons (26 percent), the intention to set up a new or other scheme (12 per cent) or a change in the ownership of theorganisation concerned (ten per cent). In contrast, costs were not an important reason for the closureof money-purchase schemes (three per cent). Their closure was mainly driven by the original intentionto limit membership (54 per cent) and, to a much lesser extent, to switch to a stakeholder pension (12per cent) or the realisation that there were not enough members or a reduced workforce, whichrestricted potential membership (11 per cent).

The costs and financial liabilities associated with running occupational pension schemes were also keyreasons for recent closures of salary-related schemes. For instance, half of all salary-related schemes(50 per cent) closed since 2002 were closed because they had been deemed too expensive to run,compared with 29 per cent of schemes closed prior to 2002. There were fewer marked differences inthe reasons for the closure of money-purchase schemes, although the small number of schemesclosed since 2002 prevented a detailed analysis of closures of this type of occupational pensionschemes.


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Table 5.13 Reasons for closure of salary-related and money-purchase schemes

Cell percentages

Type of Scheme

Salary-related Money purchase

Closed prior Closed 2002 Closed prior

Reasons for closure to 2002 or 2003 All to 2002 All

Scheme too expensive to run 29 50 32 2 3

Not enough money to meet liabilities 3 37 9 1 1

Stock market conditions * 8 2 0 0

Wanted to switch to group personal pension or personal pension 1 3 1 9 7

Wanted to switch to defined contribution (or money purchase) 1 8 2 0 0

Wanted to switch to a stakeholder pension scheme 7 3 6 15 12

Set up a new or other scheme (unspecified) 13 4 12 10 8

Recent/anticipated changes to pension legislation or tax 3 2 3 * *

Recent changes to accounting practices 1 1 1 2 1

Change of ownership of organisation - organisation merged 11 1 10 3 2

Previous scheme was not attractive 2 1 2 3 2

Too much administration involved/make administration easier * 0 * 7 5

Not enough members/reduction in workforce 0 1 * 13 11

Only intended for one or two directors/one person 31 1 26 43 54

Don’t know 3 2 2 0 0

Other 8 4 7 3 3

Weighted base 846 188 1152 1035 1370


Base is closed salary-related and money-purchase schemes. Columns may total more than 100% because respondents could choose more than one answer. * = Less than 0.5 per cent, but more

than zero.

Occu

patio

nal p

ensio

ns

83

Most closures of schemes during the last four years coincided with openings of other schemes duringthat same period, either before or after the closure (Table 5.14). In total, 93 per cent of organisations,which closed one or more occupational pension schemes between 1998 and 2003, also set up a newor alternative arrangement. However, this figure is inflated by the inclusion of the provision of accessto stakeholder pensions, which, as shown in Chapters 2 and 3, only in a minority of cases entailed theemployer making contributions and which attracted only a small active membership. As shown inChapter 4, any replacement of closed schemes by newly-opened schemes was insufficient to preventthe dwindling of active membership in occupational pension schemes, in particular open salary-related schemes, between 2000 and 2003 (cp. Table 4.4).

Table 5.14 Organisations opening and closing pension schemes, by typeof scheme (last four years)

Cell percentages

Schemes closed in last four years

Schemes opened in the last

four years Salary-related Money Purchase All

Occupational 40 62 53

Stakeholder pension 70 82 78

GPP 25 16 19

Personal pension 5 8 6

Any 93 91 92



Base is all organisations closing an occupational scheme in last four years. Total included 11 cases (unweighted) of

‘other’ schemes.

5.3.6 Contracting out of State Second Pension

Employers who set up occupational pension schemes may contract out of the State Second Pension(S2P), which superseded the State Earnings-Related Pension Scheme (SERPS) in April 2002.Contracting out results in lower National Insurance contributions being payable by employers andemployees. In order for salary-related schemes to be contracted out (COSRS), they must first meet ascheme quality test known as the Reference Scheme test (this applies to schemes contracting-out inrespect of members’ employment after April 1997 (i.e. in contrast to the arrangements applyingbefore then).

Money-purchase schemes can also be contracted out, becoming Contracted Out Money PurchaseSchemes or COMPS. Occupational pension schemes may also contract out on a mixed benefit basis asCOMBS.

There was a near even split between open salary-related occupational pension schemes, which hadcontracted out, and those which had not (Table 5.15)6. In the case of open money-purchase schemes,only 13 per cent had contracted out, whereas 69 per cent of other open occupational pensionschemes, which calculated benefits on a mixed money-purchase and salary-related or some other,not further specified, basis had contracted out of S2P. Similarly, whereas about half of all closed

6 DN Please insert note text


84

salary-related schemes (52 per cent) had contracted out, only a minority of closed money-purchaseschemes (eight per cent) had done so. This said, in the former case, the percentage figure might havebeen affected by the large proportion of ‘don’t know’ responses (25 per cent).

The statistics for salary-related open occupational schemes were strongly affected by the inclusion ofone highly weighted case in the analysis. After the exclusion of this case, the analysis suggested thata much higher proportion of this type of scheme had contracted out of S2P (75 per cent), which wouldbe more in line with expectation and the findings of previous Employer Pension Provision Surveys. Theresults of this additional analysis are shown in Table B.1 in Appendix B.

Table 5.15 S2P status of occupational schemes by type of scheme

Column percentages




S2P status related purchase Other related purchase Other All

Contracted out of S2P? 53 13 69 52 8 [10] 28

Not contracted out? 47 84 13 22 89 [9] 65

Part-contracted in, part

contracted out? * * 3 * 3 [2] 1

Do not know * 3 16 25 * [3] 5

Weighted base 34 47 15 15 48 6 165

Unweighted base 362 285 161 344 102 24 1278



Figures in [ ] have a base of less than 50 cases and report absolute frequencies.

Larger schemes were more likely to have contracted out of S2P than smaller schemes were (Table5.16). Only in the case of very small schemes with less than 20 active members had the majority ofoccupational pension schemes contracted-in.

Table 5.16 SERPS/S2P status of occupational schemes by size of scheme

Column percentages


100- 250- 500- 1000-

S2P status 1-19 20-49 50-99 249 499 999 4999 5000+

Contracted out of S2P? 17 65 51 74 55 79 77 75

Not contracted out? 77 25 46 22 34 15 19 14

Part-contracted in, part

contracted out? 1 0 3 3 11 6 5 11

Do not know 5 11 0 * 0 0 0 0

Weighted base 123 14 5 4 2 1 2 1

Unweighted base 268 113 99 161 158 130 189 62

Base is open and closed occupational schemes with at least one member. * Less than 0.5 per cent, but more than zero.


85

COMBS

COMBS schemes are occupational pensions schemes which have been contracted out on a mixedbenefit basis. In effect, this means that COMBS contain two (or more) separate sections, at least oneof which operates on a salary-related basis and at least one on a money-purchase basis. Eight per centof occupational schemes were defined as being COMBS and eight per cent of active members werein a COMBS scheme.

In the case of nearly two-thirds of COMBS, the majority of their members were in the salary-relatedsection of the scheme (60 per cent), while for 36 per cent of COMBS, the majority of members werein the money-purchase section of the scheme. Seventy-five per cent of COMBS were open schemes,17 per cent closed and a further nine per cent were frozen schemes.

Almost 40 per cent of respondents said that the scheme started to contract out on a mixed benefitbasis in 1997 (the earliest that it could have been), three per cent in 1998, less than 0.5 per cent in1999, one per cent in 2000, 17 per cent in 2001, and again less than 0.5 per cent in 2003. Thirty-nineper cent could not remember when it was started.

Thirty-seven per cent started to contract out on a mixed-benefit basis because of actuarial advice, 31per cent because it was advantageous for the employees, four per cent because it was advantageousfor the employer, two per cent because it was the scheme members’ choice and 20 per cent becauseof other reasons. Eleven per cent said that they did not know why the scheme had been contractedout.

5.4 Membership of occupational schemes

This section investigates the characteristics of the membership of occupational pension schemes.

5.4.1 Membership restrictions

The majority of open salary-related, money-purchase and other occupational pension schemes wereopen to all members (79 per cent overall) (Table 5.17). The percentage was lowest for money-purchase schemes (69 per cent), mainly because about one-quarter of these (24 per cent) restrictedaccess to senior management only (‘Top Hat’ schemes).


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Table 5.17 Employees allowed to join occupational scheme by type ofscheme

Column percentages


Is the scheme open to all employees, Open schemes

or can only certain types of Salary- Money

employee join? related purchase Other All

All employees 88 69 89 79

Senior management only 4 24 8 14

Only those invited to join 2 4 * 3

All employees with a minimum length of service 1 1 * 1

All employees over a certain age 1 * * 1

White collar/staff employees only * 1 * 1

Blue collar/works employees only * * 0 *

All employees in particular subsidiaries 1 * 1 1

All employees up to senior management * * * *

Other group of employees 3 1 1 2



Base is all open occupational schemes.


Very small pension schemes (1-19 active members) were less likely to be open to all employees,primarily because a large proportion was reserved for senior management (Table 5.18). Schemes withover 100 active members also were less likely to be open to all employees as they added a number ofrestrictions, including limiting access to employees above a certain age and/or working in particularsubsidiaries. Schemes with 50 to 99 members were more likely than other schemes to be restricted toemployees with a minimum length of service (nine per cent). Schemes with between 20 and 49 activemembers were most likely to be open to all employees (92 per cent).


87

Table 5.18 Employees allowed to join occupational scheme by size ofscheme

Column percentages

Is the scheme open to all Size of scheme (number of active members)

employees or can only certain 100- 250- 500- 1000-

types of employee join? 1-19 20-49 50-99 249 499 999 4999 5000+

All employees 78 92 85 73 75 77 55 77

Senior management only 17 4 1 3 2 1 1 0

Only those invited to join 4 1 3 2 3 1 2 9

All employees with a minimum

length of service * 1 9 2 4 5 0

All employees over a certain age * 0 0 6 8 5 8 1

White collar/staff employees only 1 * * 2 1 0

Blue collar/works employees only * 0 1 0 2 0 0 0

All employees in particular

subsidiaries * 1 5 3 9 10 14

All employees up to senior

management * 0 * 1 0 0 1 0

Other group of employees 1 2 1 7 3 7 17 0

Weighted base 58 12 3 3 1 1 1 1

Unweighted base 121 63 47 111 92 80 134 49

Base is all open occupational schemes with at least one member.


5.4.2 Membership profile

The membership of occupational pension schemes consists of three groups:

• Active members who are current employees and members of the scheme.

• Deferred pensioners, that is, usually former employees who have left the scheme and no longercontribute to it, but have their pension rights frozen or retained in the scheme until they drawthem as (part of) their pension or have the contributions transferred to a new pension scheme.

• Current pensioners who are former contributors to the scheme now drawing their pension.

Averaged across all open salary-related, money-purchase, ‘other’ and any closed schemes, a majorityof total members were active members, that is, current employees of the organisation providing thepension (Table 5.19). Closed salary-related schemes (66 per cent) had proportionately fewer activemembers than open salary-related schemes7 (77 per cent), whereas the opposite was the case formoney-purchase schemes: while in closed money-purchase schemes, on average, 89 per cent ofmembers were active members, in open money-purchase schemes, it was only 66 per cent.

7 Table 4.4, Chapter 4, reported a decline in active membership of open salary-related schemes in organisationswith 20 or more employees from 24 per cent in 2000 to 16 per cent in 2003, compared to a increaseamong organisations with less than 20 employees (from one per cent to two per cent). The presentanalysis revealed that in organisations with 20 or more employees, active members, on average, constitutedabout 60 per cent of total members of open salary-related schemes, but about 90 per cent of members inorganisations with less than 20 employees.


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Table 5.19 Membership profile of occupational schemes by type ofscheme

Column percentages




Membership profile related purchase Other related purchase Other All

Average percentage of total

members that are:

Active members 77 65 77 66 89 [52] 77

Deferred pensioners 13 11 15 22 5 [33] 10

Current pensioners 9 24 8 12 6 [11] 13

Average percentage of active

members that are:

Full-time employees 68 97 62 90 99 [97] 89

Part-time employees 32 3 38 10 1 [3] 11

Men 56 38 43 74 50 [96] 51

Women 44 62 57 26 50 [4] 49

Weighted base 34 46 13 12 41 5 151

Unweighted base 334 265 96 307 95 19 1116

Base is open and closed occupational schemes (not frozen). This information was only collected for the first three

occupational schemes per organisation and is therefore missing for 15 schemes overall. Figures in [ ] are average

percentages based on unweighted data.

Between five (closed money-purchase schemes) and 22 per cent (closed salary-related schemes) ofmembers were deferred pensioners and between six (closed money-purchase schemes) and 24 percent (open money-purchase schemes) were current pensioners.

Once again, these statistics were strongly affected by the inclusion in the analysis of just one heavilyweighted case, which particularly affected the results of the analysis of the gender composition ofactive members of open money-purchase schemes. The results of the re-analysis of this table withoutthis heavily weighted case are shown in Table B.2 in Appendix B.

The vast majority of active members of open money-purchase and of closed schemes were full-timeemployees (97 per cent to 99 per cent), compared to just about two-thirds of members of open salary-related schemes (68 per cent) and of other open schemes (62 per cent). Similarly, men, who aretypically more likely to be full-time employees than women are, constituted the majority of activemembers of open salary-related schemes (56 per cent) and of closed salary-related schemes (74 percent), whereas women made up the majority of open money-purchase scheme members (62 percent) and of members of other open occupational pension schemes (57 per cent), and half of themembership of closed money-purchase schemes.

It was shown earlier (Table 5.10) that larger occupational pension schemes tended also to be olderschemes. Unsurprisingly, therefore, larger schemes tended to have relatively fewer active members,i.e. current employees as members, than smaller schemes, while catering for larger shares of deferredand current pensioners (Table 5.20).


89

Table 5.20 Membership profile of occupational schemes by size ofscheme

Mean column percentages

Membership profile Size of scheme (number of active members)

100- 250- 500- 1000-

1-19 20-49 50-99 249 499 999 4999 5000+

Average percentage of total

members that are:

Active members 81 70 64 56 60 43 40 42

Deferred pensioners 6 16 25 33 26 38 34 32

Current pensioners 13 14 11 11 15 19 26 26

Average percentage of active

members that are:

Full-time employees 92 71 95 94 91 94 90 86

Part-time employees 8 29 5 6 9 6 10 14

Men 51 49 68 69 64 69 72 62

Women 49 51 32 31 36 31 28 38

Weighted base 123 14 5 4 2 1 2 1

Unweighted base 268 113 99 161 158 130 189 62

Base is open and closed occupational schemes with at least one member. This information was only collected for the

first three occupational schemes per organisation and is therefore missing for 15 schemes overall.

There were only small differences in the average percentage of active members of pension schemesof different size who were full-time employees (86 per cent overall), with the exception of schemeswith between 20 and 49 members. In the latter case, full-time employees made up only 71 per centof all active members, which, in turn, was a reflection of the comparatively high percentage ofdeferred and current pensioners in this group of pension schemes. These schemes were also the onlyones for which the average proportion of male active members fell below 50 per cent (49 per cent).Generally, male membership increased with the size of the schemes and was highest in schemes with1000 to 4999 active members (72 per cent).

5.4.3 Pension ages

Over half of open salary-related (55 per cent) and ‘other’ occupational schemes (73 per cent) had setthe normal pension age for men at 60 years, compared to less than one in five of open money-purchase schemes (18 per cent) (Table 5.21). For the majority of the latter (81 per cent), the normalpension age for men was 65 years. Closed schemes were most likely to have determined men’snormal pension age at 65 years.

Three-quarters (salary-related and money-purchase) or more (‘other’ schemes) of open occupationalschemes had set women’s normal pension age at 60 years, as had most closed schemes. However,while this was true for 80 per cent of closed money-purchase schemes, it was the case only for 45 percent of closed salary-related schemes. A further 44 per cent had, instead, determined women’snormal pension age to be 65 years.

Salary-related schemes were more likely to have set equal pension ages for men and women thanmoney-purchase or ‘other’ occupational schemes, and open schemes were more likely to have doneso than closed schemes. Larger organisations were most likely to have equalised pension ages (Table5.22). Only just about one-third of very small businesses (39 per cent) had done so.


90

The low proportion of different types of occupational pension schemes with equal pension ages formen and women (illustrated in Table 5.21) was unsuspected and differed substantially from previousEmployer Pension Provision Surveys. The statistics in Table 5.22 illustrate why the percentage of alloccupational schemes with equal pension ages was so low (54 per cent): less than two in five schemes(38 per cent) with fewer than 20 members had established equal pension ages for men and women.This statistics, due to the weighting of smaller organisations and, by implication, many smallerpension schemes, has a disproportionate effect on the statistic for all occupational schemes. On closerinspection, over three-quarters (77 per cent) of schemes in this size category (1-19 members) withoutequal pension ages had, in fact, only one member. The question regarding equal pension ages was,therefore, likely to have been of limited relevance to these employers, which might have affectedresponses.8 These employers might also have been less aware of the legal requirement for equalpension ages.

The unexpectedly low percentage of schemes with equal pension ages also appeared, once again, tobe affected by the inclusion of one heavily-weighted case of a small organisation (1-9 employees) inthe survey sample. The results of an analysis excluding this case are shown in Table B.3 in Appendix B.Table 5.22 is also reproduced in Appendix B, although the case exclusion had a less marked effect onthe cross-tabulated statistic of that table.

Table 5.21 Normal pension ages of occupational schemes by type ofscheme

Column percentages




Normal pension age related purchase Other related purchase Other All

Men

50-55 2 * 0 0 6 [1] 2

56-59 * 0 0 0 0 [0] *

60 55 18 73 24 24 [6] 32

61-64 1 1 1 9 * [0] 2

65 42 81 26 67 72 [12] 64

Women

50-55 3 * 0 * 6 [1] 2

56-59 * 0 0 0 0 0 *

60 76 75 87 45 80 [8] 75

61-64 1 1 1 11 8 [0] 4

65 19 24 12 44 7 [10] 19

Continued

8 Whereas for all these one-member schemes, the reported pension age for men was 65 years, in 94 percent of cases, the pension age for women was reported to be 60 years or, in a further six per cent of cases,63 years.


91


Column percentages





Percentage with

equal pension ages

for men and women 74 45 86 68 36 [17] 54

Weighted base 34 46 13 12 41 5 151

Unweighted base 334 265 96 307 95 19 1116


occupational schemes per organisation and is therefore missing for 15 schemes overall.

Notes: * = Less than 0.5 per cent, but more than zero. Figures in [ ] have a base of less than 50 cases and report

absolute frequencies.

Table 5.22 Normal pension ages of occupational schemes by size ofscheme

Column percentages


100- 250- 500- 1000-

Normal pension age 1-19 20-49 50-99 249 499 999 4999 5000+

Men

50-55 3 * 0 2 1 0 0 0

56-59 0 0 1 0 0 0 0 0

60 26 43 13 18 11 19 12 41

61-64 1 1 5 5 6 12 14 4

65 70 57 81 75 82 69 74 56

66-69 0 0 0 0 0 0 0 0

Women

50-55 3 * * 3 1 0 0 0

56-59 0 0 1 0 0 0 0 0

60 83 53 25 19 12 19 12 41

61-64 4 1 5 5 6 12 14 4

65 10 46 70 74 81 69 74 56

66-69 0 0 0 0 0 0 0 0

Percentage with equal

pension ages for men

and women 39 90 88 98 100 99 100 100

Weighted base 123 14 5 4 2 1 2 1

Unweighted base 268 113 99 161 158 130 189 62





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5.5 Contributions to occupational schemes

5.5.1 Employee contributions

Forty one per cent of occupational pension schemes were contributory for employees (Table 5.23).However, the rate was over twice this level among open salary-related schemes (90 per cent of whichwere contributory) and also nearly twice the average among closed salary-related schemes (78 percent). Only 31 per cent of open money-purchase and 33 per cent of ‘other’ schemes werecontributory. Still fewer money-purchase schemes, which were closed to new members, werecontributory (nine per cent).

Table 5.23 Employee contribution basis of occupational schemes by typeof scheme

Column percentages




related purchase Other related purchase Other All

Contributory 90 31 33 78 9 [15] 41

Non-contributory 10 69 67 22 91 [8] 59

Weighted base 34 46 14 15 48 6 163

Unweighted base 359 281 102 344 102 23 1212

Base is all open and closed occupational schemes with at least one member. Figures in [ ] have a base of less than 50

cases and report absolute frequencies.

5.5.2 Employer contributions

One in ten schemes received no contribution from employers, mainly due to the fact that about onein seven schemes (14 per cent) with fewer than ten active members received no such contribution.Although small schemes of this kind are numerous and weighted accordingly in the analyses, theyaffect only a small proportion of all active members of occupational pension schemes. In order toobtain a more realistic picture of the pattern of employers’ contributions to occupational pensionschemes, which reflects the position of the majority of active members, the following analyses haveexcluded schemes with less than ten members (Table 5.24 and 5.25). For this reason, comparison withthe similar tables in the 2000 EPP report is not advised.

Overall, two per cent of schemes with ten or more members did not receive any contribution fromemployers. Salary-related schemes tended to receive the highest contribution, which was true forboth open and closed schemes of this type and reflected in the percentage distribution ofcontributions (Table 5.24; top half) as well as the median and mean percentage distributions (Table5.24; bottom half). In the case of half of all open salary-related schemes, active members receivedeight per cent or more of payroll costs in contributions, compared to five per cent of payroll costs in thecase of open money-purchase schemes and seven per cent of payroll costs in the case of other openschemes. Active members of closed salary-related schemes received the highest percentage levelcontributions, with employers contributing 13 or more per cent of payroll costs to half of all schemes.


93

Table 5.24 Employer contributions to occupational schemes by type ofscheme (schemes with 10 or more active members)

Column percentages

Average employer’s

contribution over three Type and status of occupational scheme

years as percentage of Open schemes Closed schemes

payroll costs of an Salary- Money Salary- Money

active member related purchase Other related purchase Other All

Not presently contributing 3 1 2 3 0 0 2

Less than 3% * 3 0 2 21 42 2

3 – 3.9% 1 10 5 2 5 0 4

4 – 4.9% * 19 * * 4 0 6

5 – 5.9% 2 28 * 2 2 5 9

6 – 6.9% 12 8 1 7 14 0 9

7 – 9.9% 38 14 73 15 51 0 31

10% or higher 44 15 19 68 3 53 37

Money amount * 2 0 * 0 0 1

Median percentage contribution 8 5 7 13 7 14 7

Mean percentage contribution 11 6 8 14 7 13 10

Weighted base 16 9 3 6 1 1 35

Unweighted base 308 197 83 261 21 12 882

Base is all open and closed occupational schemes with at least ten members.

The base for a similar table in the 2000 EPP report was all open and closed schemes regardless of size; comparison is

therefore not advised.

Median and mean estimations based on schemes with employer contributions.


Median percentage contributions tended to be slightly higher among larger and very largebusinesses, but so was the percentage of schemes not receiving employer contributions (Table 5.25).Between 13 per cent and 16 per cent of the largest occupational pension schemes (1000 or moremembers) did not receive any employer contributions at the time of the interview, compared to anaverage of two per cent for all schemes with ten or more members. However, large schemes, whichemployers did contribute to, benefited from higher median contributions, which ranged from 11 percent to 12 per cent of payroll costs, compared to an average of eight per cent.


94

Table 5.25 Employer contributions to occupational schemes by size ofscheme (schemes with 10 or more active members)

Column percentages

Average employer’s Size of scheme (number of active members)

contribution over last 100- 250- 500- 1000-

three years 10-19 20-49 50-99 249 499 999 4999 5000+

Not presently contributing 1 1 0 5 2 8 16 13

Less than 3% 0 2 4 2 * 1 8 0

3 – 3.9% 10 1 3 6 5 0 1 0

4 – 4.9% 0 11 1 6 4 3 7 0

5 – 5.9% 15 5 1 23 7 5 2 4

6 – 6.9% 21 5 6 6 8 6 4 0

7 – 9.9% 35 37 26 13 25 22 12 29

10% or higher 18 33 60 38 47 54 51 54

Money amount 1 * 0 3 1 1 0 0

Median percentage contribution 7 7 10 8 9 11 11 12

Weighted base 9 13 5 3 2 1 2 1

Unweighted base 53 99 86 146 143 119 181 57

Base is open and closed occupational schemes with at least ten members. The base for a similar table in the 2000 EPP

report was all open and closed schemes regardless of size; comparison is therefore not advised. Median and mean

estimations based on schemes with employer contributions.


Over one-third of active members were in schemes (with ten or more members) to which employerscontributed ten or more per cent of pay (36 per cent), while about another third (30 per cent) were inschemes receiving employer contributions of seven to ten per cent. Two per cent of active membersreceived less than three per cent of pay towards their pension scheme, rising to eight per cent amongschemes with 1000-4999 members. Similarly, two per cent of active members received no employercontributions, rising to 16 per cent and 13 per cent of active members of schemes with 1000-4999members and 5000 or more members, respectively.

5.6 Scheme valuations

This section explores two types of valuations for salary-related schemes; the Minimum FundingRequirement (MFR) valuation and the scheme’s own valuation.

The MFR was part of a set of measures introduced with the 1995 Pensions Act, which was designedto protect members of salary-related occupational schemes. The MFR came into force in April 1997.It requires salary-related schemes to hold a minimum level of assets to meet their liabilities. It also setsout time limits within which any underfunding must be corrected. MFRs are carried out on behalf ofthe scheme’s trustees by the actuary in accordance with relevant legislation and professionalguidance.

In March 2002, the Government introduced interim changes to the way MFR valuations areconducted. The revisions included an extension of the deficit correction periods, i.e. the time allowedfor pension schemes to meet the required funding levels. Schemes meeting less than 90 per cent ofMFR will be given three years, rather than one year, to reach this 90 per cent level, while schemes withMFR funding levels of over 90 per cent, but less than 100 per cent, will be given ten rather than fiveyears to reach the fully-funded level. Moreover, schemes which are fully funded on the MFR basis, willbe exempt from the annual recertification requirement of the legislation.


95

A scheme’s own valuation contrasts the scheme’s assets with its liabilities and, based on thiscomparison, sets the contribution rate necessary to keep both in balance. Own valuations arerequired every three years in addition to the MFR valuations.

5.6.1 Minimum Funding Requirement valuations

Obtaining information about the conduct of MFR valuations was fraught with difficulties, as in thecase of one-third of schemes survey respondents did not know whether these valuations had, in fact,taken place. This was most likely because it is the trustees’ responsibility to ensure MFR valuations areconducted and respondents, who were employees of the organisations but not trustees of theirschemes, were not always privy to this information. Excluding ‘don’t know’ responses, 89 per cent ofall salary-related schemes had been MFR valued, including 98 per cent of all closed salary-relatedschemes (Table 5.26). Since schemes are required to carry out MFR valuations at least every threeyears, by the time of the EPP 2003 interview all schemes should have had an MFR valuation.

Table 5.26 Minimum Funding Requirement valuation by type of scheme(respondents)

Column percentages

Type of scheme

Has the scheme had a Minimum Open salary- Closed salary- All salary-

Funding Requirement valuation? related related related


Excluding don’t knows

Yes 87 98 89

No 13 2 11



Base is all open and closed salary-related schemes.

Respondents in organisations with schemes of less than 100 active members were least likely to knowwhether their pension scheme had been subjected to an MFR valuation (Table 5.27). Smaller schemeswere also least likely to have been MFR valued: 88 per cent of schemes with up to 99 active membershad been valued, compared to 98 per cent of larger schemes.

Table 5.27 Minimum Funding Requirement valuation by size of scheme

Column percentages

Has the scheme had a Minimum Number of active members

Funding Requirement valuation? 1-99 100-99 1000+ All



Yes 88 98 98 89

No 12 2 2 11





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The majority of open salary-related schemes had been MFR valued within the last two years, including63 per cent in 2002 alone (Table 5.28). In contrast, most salary-related schemes, which were nowclosed, had been valued between 2000 and 2002 (85 per cent).

Table 5.28 Date of Minimum Funding Requirement valuation by type ofscheme

Column percentages

Status of scheme

When was the Minimum Funding Open salary- Closed salary- All salary-

Requirement valuation conducted? related related related

1998 * * *

1999 * 8 2

2000 17 21 18

2001 7 32 13

2002 63 32 55

2003 7 3 7

Don’t know exactly but within last 6 years * 2 *

Don’t know exactly but over 6 years ago 5 * 4

Don’t know 1 2 1



Base is all open and closed salary-related schemes that had a MFR valuation. * Less than 0.5 per cent, but more than

zero.

According to funding positions in relation to the MFR only, most open salary-related schemes hadbeen MFR valued at 100 per cent or more of their liabilities (90 per cent), as were 69 per cent of closedschemes (Table 5.29). Three per cent of open schemes and 11 per cent of closed schemes had beenvalued at less than 90 per cent of their liabilities and, under new MFR requirements, would be giventhree years to reach the 90 per cent level. A further seven per cent of open and 20 per cent of closedschemes were valued between 90 per cent and 99 per cent of their liabilities and would be expectedto reach fully-funded levels within ten years.

Table 5.29 MFR value of scheme’s assets as a percentage of liabilities bytype of scheme

Column percentages

What was the value of the Status of scheme

scheme’s assets as a percentage Open salary- Closed salary- All salary-

of its liabilities? related related related



70 – 89 per cent 3 11 5

90 – 99 per cent 7 20 10

100 – 119 per cent 17 43 22

120 per cent or more 73 26 63



Base is all open and closed salary-related schemes that had a MFR valuation.


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Smaller schemes (1-99 active members) and larger schemes (1000+ members) were most likely to befully funded (88 per cent and 86 per cent respectively), while medium-sized schemes (100-999 activemembers) were markedly more likely to be underfunded at below 100 per cent and below 90 per centthan either smaller or larger schemes (Table. 5.30).

Table 5.30 MFR value of scheme’s assets as a percentage of liabilities bysize of scheme

Column percentages

What was the value of

the scheme’s assets as

a percentage of its Number of active members

liabilities? 1-99 100-99 1000+ All

Don’t know 18 10 11 17

70 – 89 per cent 4 11 3 5

90 – 99 per cent 8 20 11 10

100 – 119 per cent 17 42 42 22

120 per cent or more 71 27 44 63



Base is all open and closed salary-related schemes that had a MFR valuation.

Eighty-one per cent of the schemes that were underfunded had taken action to rectify this situation.These actions included increasing the employer’s contributions (54 per cent), increasing themembers’ contributions (33 per cent), making cash injections to the fund (12 per cent) and otheractions (20 per cent).

5.6.2 Scheme’s own funding valuations

Organisations were also asked about the outcomes of their own scheme’s funding valuations on anongoing basis. Once again, a high level of ‘don’t know’ responses to this questions and variations in‘don’t knows’ between types and different sizes of schemes, made the interpretation of the surveyfindings difficult. Excluding don’t knows, two in five open salary-related schemes (40 per cent) andjust over half of all closed schemes (52 per cent) were found to have been in surplus at their lastvaluation (Table 5.31). The proportion in surplus increased with the size of the scheme and washighest for schemes with 1000 or more active members (58 per cent) (Table 5.32).


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Table 5.31 Scheme’s own ongoing funding valuation outcome by typeof scheme

Column percentages

Status of scheme

At its most recent valuation, was the Open salary- Closed salary- All salary-

scheme found to be in surplus? related related related



Yes 40 52 43

No 60 48 57




Table 5.32 Scheme’s own ongoing funding valuation outcome by size ofscheme

Column percentages

At its most recent

valuation, was the scheme Number of active members

found to be in surplus? 1-99 100-99 1000+ All

Don’t know 41 13 2 38


Yes 42 43 58 43

No 58 57 42 57




Almost half of all salary-related schemes in surplus (43 per cent) had taken no action to change thesurplus situation, including 34 per cent of open schemes and 68 per cent of closed schemes (Table5.33). However, 24 per cent of open schemes had reduced employers’ contributions and also 24 percent had reduced members’ contributions. Only one per cent had taken the surplus as an opportunityto enhance benefits.


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Table 5.33 Action taken because of surplus by type of scheme

Column percentages

Status of scheme

Has any action been taken Open salary- Closed salary- All salary-

because of this surplus? related related related

No, no action taken 34 68 43

Employers’ contributions stopped 2 5 3

Employers’ contributions reduced 24 4 19

Members’ contributions stopped * * *

Members’ contributions reduced 24 1 18

Benefits enhanced 1 4 2

Excess retained in fund * * *

Money withdrawn by organisation 0 0 0

Continuous contribution holiday 2 1 1

Do not know 37 3 28

Other * 19 5



Base is all open and closed salary-related schemes that had a surplus. Note: * Less than 0.5 per cent, but more than

zero.

Smaller schemes (1-99 members) were most likely to have taken no action or to have reducedemployer’s and/or members’ contributions in response of their scheme surplus, whereas largerschemes (1000+ members) were most likely to have stopped or reduced employers’, but notmembers’ contributions (Table 5.34). In fact, almost one-third of schemes with 1000 or moremembers had taken scheme surplus as an opportunity to stop employer’s contributions (30 per cent).Medium-size schemes with between 100 and 999 members were more likely to have stopped (11 percent) rather than merely reduced (three per cent) employers’ contributions, but were less likely tohave done so than larger schemes.

Table 5.34 Action taken because of surplus by size of scheme

Column percentages

Has any action been taken Number of active members

because of this surplus? 1-99 100-99 1000+ All

No, no action taken 61 31 49 57

Employers’ contributions stopped 0 11 30 3

Employers’ contributions reduced 21 3 8 19

Members’ contributions stopped 0 1 1 *

Members’ contributions reduced 20 3 8 18

Benefits enhanced 1 7 10 2

Excess retained in fund 0 2 0 *

Money withdrawn by organisation 0 0 0 0

Do not know 33 3 1 25

Other 5 5 3 5



Base is all open and closed salary-related schemes that had a surplus. Note: * Less than 0.5 per cent, but more than

zero.


101Group Personal Pensions and personal pensions

6 Group Personal Pensionsand personal pensions

6.1 Introduction

This chapter explores the provision of Group Personal Pensions (GPPs) and employers’ contributionsto personal pensions other than stakeholder pensions, which are discussed in Chapter 3. Section 6.2examines GPPs, while Section 6.3 looks at personal pension plans.

6.2 Group Personal Pensions

GPPs are pensions arranged by employers for a group of employees and typically purchased from aninsurance company. Employers may or may not choose to contribute to GPPs (most do contribute) andoften prefer GPPs over occupational pensions because the former do not require them to becomedirectly involved in the pension product’s management and, therefore, involve fewer administrativeresponsibilities. Employers may be able to negotiate favourable terms with the product providers,which make GPPs financially more attractive than individually arranged personal pension plans.

GPPs covered in this section include both GPPs to which employers contributed and GPPs to whichthey did not contribute. We use the term ‘scheme’ to describe the collection of individual plans thatconstitute the GPP.

6.2.1 Group Personal Pension providers

Twelve per cent of private-sector organisations had set up a GPP for their employees (cp. Chapter 2).GPPs were most frequently found among medium-sized and larger businesses. Eleven per cent of allcurrent providers of pensions provided only a GPP while another 12 per cent offered a GPP alongsideother pension products (Chapter 2).

Sixty-two per cent of GPP-providing organisations with up to 19 employees provided only GPPs fortheir employees, but no other form of pension, as did 18 per cent of GPP-providing organisations with20 or more employees (Table 6.1). Other organisations provided GPPs alongside other pensionproducts, most frequently by also providing access to stakeholder pensions (21 per cent of smallerorganisations; 31 per cent of larger organisations). Over 30 per cent of larger organisations alsoprovided GPPs in combination with (access to) stakeholder and occupational pensions, or stakeholderand personal pensions.

102 Group Personal Pensions and personal pensions

Table 6.1 GPP arrangements by size of organisation

Column percentages



1-19 20+ All

Type of GPP provision

GPP only 62 18 47

Occupational and GPP 2 7 4

GPP and PP 11 8 10

Stakeholder and GPP 21 31 24

Stakeholder, occupational and GPP * 17 6

Occupational, PP and GPP 1 1 1

GPP, PP and stakeholder pension 4 17 9

Four schemes 0 4 1

Number of GPP schemes

1 GPP scheme 95 90 94

2 GPP schemes 4 8 5

3 or more GPP schemes * 2 1

Members of GPP schemes as a proportion

of all employees

None * * *

0.01 to 25% 15 40 23

26 – 50% 26 25 26

51 – 75% 36 21 31

76 – 100% 23 14 20

Number of employees in a GPP

1 – 2 53 9 39

3 – 5 31 12 25

6 – 29 16 49 26

30+ 0 30 9

Proportion of GPP members that employer

makes contributions for

None 5 6 5

Some 55 55 55

All 40 39 40



Base is organisations with a GPP.

Note: * Less than 0.5 per cent, but more than zero.

In the majority of cases, providers offered just one GPP (95 per cent of smaller organisation; 90 percent of larger organisations), with just six per cent of all organisations offering two or more GPPs.

GPPs in smaller organisations tended to cover a larger proportion of the workforce than GPPs in largerbusinesses. Fifty-nine per cent of organisations with up to 19 employees provided GPPs for, at least,51 per cent of their workforce, whereas this was the case for only 35 per cent of organisation with 20or more employees. In terms of numbers, smaller businesses, however, typically provided GPPs forfewer employees than larger businesses did.

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In the majority of cases, employers made contributions to GPPs for some or all of their members. Thiswas true for organisations in both size groups, among whom 40 per cent made contributions for allGPP members and 55 per cent for some GPP members.

6.2.2 Group Personal Pension Schemes

This section explores the characteristics of GPPs by individual arrangements rather than byorganisation, thus allowing for the fact that several organisations provided more than one GPP. GPPschemes without current members (eight schemes, unweighted) have been excluded from thisanalysis.

Appropriate personal pensions

Organisations who contributed to GPPs were asked how many members were contracted out of S2P.Overall, in 12 per cent of schemes all members had contracted out of S2P, with the percentage rateslightly higher than average for larger organisations (14 per cent) (Table 6.2). Twenty-seven per centof schemes had some members contracted out, including 34 per cent of schemes provided byorganisations with up to 19 employees. Fifty-five per cent of schemes of smaller organisations and 74per cent of schemes provided by larger organisations had no members contracted out.

Table 6.2 Proportion of members of GPP who are contracted out of S2Pby size of organisation

Column percentages


Of these, how many are (number of employees)

contracted out of S2P? 1-19 20+ All

None 55 74 61

Some 34 12 27

All 11 14 12



Base is GPP schemes with at least one member where the employer makes contributions.

Age of schemes

Nearly half of all GPPs had been set up since 1998 (Table 6.3). Among smaller organisations with upto 19 employees, 46 per cent of GPPs had been formed since 1998 as had 49 per cent of schemesprovided by larger organisations.

Whereas the previous employers’ pension survey (Smith and McKay, 2001, p. 91) concluded thatGPPs, which had been set up after 1991, were more likely to receive contributions from employers (95per cent) than GPPs set up before 1991 (85 per cent), this was no longer the case in 2003. The presentsurvey found that schemes set up before or after 1991 were equally likely to receive contributions (94per cent and 95 per cent respectively).

Group Personal Pensions and personal pensions

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Table 6.3 Year that GPP plan was set up by size of organisation

Column percentages


In which year did the organisation (number of employees)

first set up this GPP arrangement? 1-19 20+ All

Before 1985 14 6 11

1985 – 1988 11 6 9

1989 – 1991 3 11 5

1992 – 1994 10 13 11

1995 – 1997 18 16 17

1998 – 2000 33 25 30

2001 – 2003 13 24 16



Base is GPP schemes with at least one member.

Employer contributions

Only six per cent of GPPs received no employer contributions (Table 6.4). Over the last three years, forthe majority of schemes, employers contributed a percentage of pay (67 per cent) rather than a fixedamount of money (26 per cent) to the plan. This was particularly the case for schemes provided bylarger organisations (84 per cent). In smaller organisations (1-19 employees), 58 per cent of schemesreceived contributions based on pay.


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Table 6.4 Level of contribution of employer to GPPs by size of organisation

Column percentages


Minimum Maximum Average in last 3 years


1-19 20+ All 1-19 20+ All 1-19 20+ All

No contribution 6 6 6 6 6 6 6 6 6

Percentage of pay 44 85 58 44 84 58 58 84 67

Less than 3% 3 8 5 3 3 3 7 6 7

3% - 3.9% 12 32 19 8 21 12 9 22 13

4% - 4.9% 3 8 5 3 3 3 3 11 6

5% - 5.9% 7 22 12 9 24 14 6 25 12

6% - 10% 16 13 15 19 26 22 22 17 20

More than 10% 3 3 3 3 7 4 11 4 8

Median 5 4 5 6 5 5 6 5 5

Amount of money 50 9 36 50 10 36 35 10 26

Up to £5 per week 6 2 5 6 2 4 6 1 4

£5.01 - £10 pw 4 1 3 4 0 3 3 1 3

£10.01 - £15 pw 1 1 1 1 0 0 1 1 1

£15.01 - £25 pw 20 1 14 7 1 5 1 0 1

£25.01 - £50 pw 6 2 5 20 2 14 22 2 15

More than £50 pw 13 2 10 14 4 10 3 4 4

Median 23 20 23 46 46 46 35 48 35

Weighted base 167 85 252 167 85 252 154 83 237

Unweighted base 80 776 856 80 776 856 79 753 832

Base is GPP schemes with at least one member. Where an employer gave one fixed contribution the same value has been used for minimum and maximum. Three-year averages are reported only

for cases for which the information had been provided.

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The most frequent type of contribution among smaller organisations (1-19 employees) was tocontribute between six per cent and ten per cent of pay or between £25 and £50 per week toindividual GPPs (22 per cent of schemes in both instances), whereas among larger organisations, one-quarter (25 per cent) of schemes received employer contributions between five per cent and 5.9 percent of pay. A further fifth of schemes (22 per cent) received between three and 3.9 per cent of pay.The median proportion of pay contributed was five per cent in larger businesses and six per cent insmaller businesses. The median amount of money contributed was £35 per week for smallerorganisations and £48 for larger organisations.

Over three years, smaller organisations were more likely than in 2003 alone to make percentage-of-pay contributions, whereas, on aggregate, larger organisations appeared not to have changed theirpractice or preferences over time. Seven per cent of all schemes received less than three per cent ofpay from employers, while a further four per cent received £5 per week or less, averaged over the lastthree years.

Previous pension provision

Nineteen per cent of the organisations that had started a GPP in the last five years said that they hadpreviously made an alternative form of pension provision. Of these, seven per cent had previouslyused a still open occupational scheme, 49 per cent had used a now-closed or frozen occupationalscheme and 43 per cent were unclear about the type of provision they had previously made.

6.3 Employer contributions to employees’ personalpension plans

Employees may arrange personal pensions, which they can purchase from banks, building societies orinsurance companies. Regular contributions are made into these personal pensions, which, at thepoint of maturity, are converted into an annuity, from which the pension is then drawn. Personalpensions are often the only form of pension provision for self-employed individuals or employeeswhose employer does not provide alternative pension provisions, such as occupational schemes, ordoes only provide these alternatives for some sections of the workforce. This section explores suchpersonal pension arrangements (not including stakeholder pensions; see Chapter 3).

Employers may choose to contribute to personal pensions, although there is no obligation for them todo so. In this study, only employers who did make such contributions were covered. These employersare referred to as private-pension or PP-providers, although strictly speaking it is not the employer butthe bank, building society or insurance company from which the product was purchased that providesthe pension.

6.3.1 Personal pension contributors

In Chapter 2, we have seen that 15 per cent of organisations made contributions to personal pensionplans. This increased to approximately 30 per cent of all providers of pensions, about half of whomcontributed to personal pensions alongside providing other types of pensions. Contributing topersonal pensions was the main type of pension provision in 32 per cent of organisations and, thus,ahead of Group Personal Pensions (31 per cent) the single most important type of provision.

Among organisations contributing to personal pensions, smaller enterprises, with up to 19 employees,were most likely to do just that and provide no other form of pension (62 per cent), although one-quarter contributed to PPs and also offered access to stakeholder pensions (Table 6.5). Largerorganisations tended to offer a greater range of combinations of PPs with other pensions products,including three or more products (40 per cent).


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Table 6.5 Arrangements for contributing to employees’ personalpension plans by size of organisation

Column percentages



1-19 20+ All

Type of provision

PP 62 2 52

Occupational and PP 1 5 2

GPP and PP 8 13 8

Stakeholder and PP 24 41 27

Stakeholder, occupational and GPP 2 9 3

Occupational, PP and GPP * 2 1

GPP, PP and Stakeholder 3 24 7

Four schemes 0 5 1

Contributions to employees’ personal pension plans as a

proportion of all employees

Up to 25% 56 86 61

26 – 50% 37 12 34

51 – 75% 1 1 1

76 – 100% 5 1 4

Number of employees where employer contributes to

personal pension plan

1 78 33 71

2 12 14 12

3 5 10 6

4–9 4 30 9

10+ 1 13 3



Base is organisations that contribute to employees’ personal pension plans. Note: * Less than 0.5 per cent, but more

than zero.

The majority of organisation contributed to PPs for a quarter or less of their workforce. In the case ofsmaller organisations with up to 19 employees, 56 per cent did so, as did 86 per cent of organisationswith 20 or more employees. Five per cent of smaller organisations contributed to PPs for more thanthree-quarters of their workforce, compared to just one per cent of larger businesses.

Appropriate Personal Pensions

Since 1988, personal pensions can be contracted out of S2P. These are then called AppropriatePersonal Pensions. In 2003, over two-thirds of personal pension plans to which employers werecontributing had no employee contracted out of S2P, while six per cent had some contracted out and26 per cent had all employees contracted out (Table 6.6). Larger organisations were more likely thansmaller enterprises to have all employees contracted out of their personal pension plans.


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Table 6.6 Proportion of employees with a personal pension plan thatemployer contributes to who are contracted out of S2P bysize of organisation

Column percentages


Of these, how many are (number of employees)

contracted out of S2P? 1-19 20+ All

None 69 59 68

Some 5 9 6

All 25 32 26



Base is organisations that contribute to employees’ personal pension plans.

Number of years of contributions

About half of employers had been contributing to personal pensions for the last five years (Table 6.7),including nearly one-third of smaller organisations (31 per cent), which had started to contributewithin the last two years. This compared to nearly two-thirds of larger organisations (32 per cent),which started to contribute between 1998 and 2000.

Table 6.7 Year that employer first started contributing to employees’personal pension plans by size of organisation

Column percentages

In which year did the organisation Size of organisation

first start making contributions to (number of employees)

employees’ personal pension plans? 1-19 20+ All

Before 1985 4 9 5

1985 – 1988 6 13 7

1989 – 1991 3 8 4

1992 – 1994 19 8 17

1995 – 1997 19 15 18

1998 – 2000 18 32 21

2001 – 2003 31 15 28



Base is organisations that contribute to employees’ personal pension plans.

Employer contributions

As in the case of contributions to GPPs described earlier in this chapter, the type and amount ofcontributions made by employers varied substantially, including between organisations of differentsize. Over the last three years, larger organisations (20+ employees) were more likely than smallerorganisations (1-19 employees) to have made percentage pay contributions to PPs (76 per cent and56 per cent, respectively), and both types of organisations were more likely to have made this type ofcontribution than contributions in the form of fixed money amounts (24 per cent and 44 per cent,respectively) (Table 6.8).


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Table 6.8 Level of contribution of employer to employees’ personal pension plans by size of organisation

Column percentages


Minimum Maximum Average in last 3 years


1-19 20+ All 1-19 20+ All 1-19 20+ All

Percentage of pay 29 73 39 29 75 39 56 76 60

Less than 3% 5 11 6 3 11 5 20 16 19

3% - 3.9% 1 16 4 1 6 2 * 6 2

4% - 4.9% 1 4 1 0 2 * * 8 2

5% - 5.9% 3 16 6 1 18 5 11 17 12

6% - 10% 15 24 17 18 28 20 12 24 14

More than 10% 4 3 4 7 11 8 12 5 11

Median 9 5 6 10 6 9 9 5 8

Amount of money 71 27 61 71 25 61 44 24 40

Up to £5 per week 7 1 6 7 1 5 5 * 4

£5.01 - £10 pw 7 3 6 5 2 4 4 2 4

£10.01 - £15 pw 8 2 6 6 1 5 6 * 5

£15.01 - £25 pw 23 5 19 24 4 20 17 5 15

£25.01 - £50 pw 4 4 4 4 4 4 8 4 7

More than £50 pw 22 11 20 25 13 23 4 12 6

Median 23 28 23 23 51 23 23 51 23

Weighted base 165 45 210 165 45 210 220 50 270

Unweighted base 57 357 414 57 357 414 65 393 458

Base is organisations that contribute to employees’ personal pension plans. Where an employer gave one fixed contribution the same value has been used for minimum and maximum. Three-year

averages are reported only for cases for which the information had been provided.


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Almost a quarter of larger businesses had contributed between six and ten per cent of pay to PPs (24per cent) and a further five per cent had contributed more than ten per cent of pay.

Sixteen per cent of larger business had, on average over the last three years, contributed less thanthree per cent of pay, and a further five per cent of smaller organisations had contributed £5 or less perweek to PPs.

The median proportion of pay contributed to personal pension plans over the last three years waseight per cent, while the median amount of money contributed was £23 per week.


111Occupational pension schemes – administration

7 Occupational pensionschemes – administration

7.1 Introduction

In Chapter 5, we have explored the type of occupational schemes provided by private-sectororganisations, their membership and the contributions made by employers to them. This chapterexplores the administrative arrangements made for occupational pension schemes, includingwhether occupational schemes are insured or tax-approved and the role of trustees.

7.2 Administrative characteristics

In this chapter, we distinguish between two types of occupational pensions; insured and tax-approved schemes. Insured occupational pensions are secured by insurance policies or annuitycontracts, and insurance companies, who provide the pension, are responsible for deciding how toinvest contributions. Tax-approved schemes allow employees to receive tax relief on their contributionsat the members’ highest marginal rate. Schemes that are not tax-approved typically provide higherlevels of benefits for employees as contributions may exceed the tax relief limit for earnings. Whereastax-approved schemes must be supervised by trustees, non-approved schemes do not, althoughemployers may decide to establish a trust.

In 16 per cent of cases, it was not possible to establish whether an occupational scheme was insured,while in four per cent of cases respondents did not know whether a scheme was tax-approved. These‘don’t know’ responses were excluded from the first analysis.

Excluding don’t know responses, just under one-quarter (23 per cent) of open salary-related schemeswere insured schemes in 2003, as were 32 per cent of money purchase schemes (Table 7.1).Interestingly, 40 per cent of all closed schemes were insured, suggesting a move away from insuredschemes among currently open schemes.

112 Occupational pension schemes – administration

Table 7.1 Administrative characteristics of occupational schemes bytype of scheme

Column percentages


Open schemes


related purchase Other schemes All

Is the occupational scheme insured?

Yes 23 32 16 40 33

No 77 68 64 60 68

Is the scheme tax-approved?

Yes 92 97 100 99 97

No 8 3 * * 3



Base is all open and closed occupational schemes (not frozen). Excluding ‘don’t know’ responses.


The majority of occupational schemes captured in this survey were tax-approved (97 per cent),including nearly all of now closed schemes (99 per cent) (Table 7.1). Open salary-related schemeswere slightly more likely than other schemes to be non-approved (eight per cent).

Tax-approved schemes are required to increase pensions in payment that were accrued since 1997 byeither the rate of inflation or by five per cent, whichever is the lower. For over half of all open salary-related schemes (53 per cent), businesses indicated that the increases they had allowed tended to behigher than the minimum required amount, while this was the case for only ten per cent of openmoney-purchase schemes (Table 7.2). Approximately one in five closed occupational schemesincreased pensions in payment by more than the required amount.

Table 7.2 Increases of pensions in payment (tax-approved schemes)

Column percentages


Open schemes



Occupational scheme increased pensions

by more than the required amount?

Yes 53 10 4 21 22

No 24 71 95 74 65

Don’t know 23 19 1 6 12



Base is open and closed tax-approved occupational schemes (not frozen).

113

Large and very large schemes were least likely to be insured. Only four per cent of schemes with 5000or more active members were insured, as were five per cent of schemes with 1000 to 4999 activemembers and ten per cent of schemes with 500 to 999 members (Table 7.3). For all other size groups,around one-quarter was insured, except for schemes with 20 to 49 active members, of which only 14per cent were insured. However, the large proportion of small and medium-sized schemes, for whichsurvey respondents did not know whether they were insured, may have affected these percentages.

Table 7.3 Administrative characteristics of occupational schemes bysize of scheme

Column percentages


100- 250- 500- 1000-

1-19 20-49 50-99 249 499 999 4999 5000+

Is the occupational scheme

insured?

Yes 29 14 24 29 27 10 5 4

No 57 50 50 64 62 75 93 93

Don’t know 14 36 27 8 12 16 2 4

Is the scheme

tax-approved?

Yes 96 82 86 96 92 94 99 96

No 1 17 10 1 3 0 0 0

Don’t know 3 1 4 3 5 6 1 4

Weighted base 122 14 5 4 2 1 2 1

Unweighted base 268 113 99 161 158 130 189 62

Base is open and closed occupational schemes (not frozen).

Whether schemes were tax-approved varied by the size of schemes, ranging from a low of 86 per centof schemes with 50 to 99 active members to a high of 99 per cent of schemes with 1000 to 4999 activemembers. Between 17 per cent of tax-approved schemes (organisations with 100-499 employees)and 28 per cent of tax-approved schemes (1000+ employees) had increased pensions in payment bymore than the required amount.

7.3 Trustees

Occupational schemes are run by trustees who are charged with representing the interests of schememembers. The principal responsibilities of trustees are outlined in Figure 7.1. The Pensions Actrequires that occupational pension schemes have at least one-third member-nominated trustees.Employers have the option to propose alternative arrangements if the members approve. There are anumber of conditions, which exempt occupational pension schemes from needing to provide one-third member-nominated trustees; these include:

• all the members are trustees;

• the scheme has less than two members;

• there is a statutory independent trustee;

• the scheme is recognised by the Inland Revenue as a Small Self-administered Scheme (SSAS);

Occupational pension schemes – administration

114

• it is an executive pension scheme where the employer is the sole trustee, all the members arecurrent or former directors of the company, and at least one-third of the current directors aremembers of the scheme;

• it is a frozen insured scheme, and all the benefits are paid direct to the members;

• the scheme only pays death benefits;

• it is a wholly insured scheme and the insurance company is the trustee; and

• it is a multi-employer scheme where more than one-third of the trustees are independent of theemployers and are independently selected.

Figure 7.1 The position of trustees

* Choosing trustees

For most schemes, members have the right to choose at least one-third of the trustees, unlessthe employer suggests a different arrangement and the members agree.

* Making sure the contributions are paid

All occupational pension schemes are required to keep careful records of the contributionspaid into them and to ensure that they are paid accurately and on time. Pension schemetrustees are also responsible for making sure that schemes that need financial accounts getthem officially audited within a strict timescale.

* Investing the scheme’s money

With help from their professional advisers, pension scheme trustees are required to explain inwriting the principles behind their investment plans. This explanation is called the ‘Statementof Investment Principles’ and is available to scheme members. Trustees must open accounts tokeep money in occupational pension schemes separate from the employer’s assets. This is toprevent money in the pension schemes being used to pay off company debts, if the companygoes bankrupt. Trustees must make sure that generally no more than five per cent of themoney in an occupational scheme is invested in the employer’s own businesses.

* Choosing professional advisers to the pension schemes

Trustees are responsible for choosing specialists to advise on technical and legal matters.There must be a formal appointment in writing, clearly setting out each adviser’s duties.

* Other administrative requirements from the Pensions Act 1995

Employers must give new members details about the occupational pension scheme withintwo months of them joining the company. All scheme members are entitled to see documentsabout the scheme, including the annual report and the trust deed and rules. Every occupationalpension scheme must have a clear complaints procedure for scheme members and must keepproper records, including records of the meetings of the pension scheme’s trustees.

Source: Smith and McKay, 2001, pp. 101/02


115

7.3.1 Trustee arrangements

Respondents in organisations with tax-approved occupational schemes, which are required toappoint trustees, were asked about the type of trustee arrangements in their organisations. As inprevious surveys, a distinction was drawn between organisations with a board of individual trusteesand organisations with a sole corporate trustee. In the latter case, the trustees are a company withdirectors. The employer pension provision reports based on the 1998 and 2000 surveys combined‘don’t know’ responses and cases where no trustees had been appointed. We adopt the sameapproach in this report. In just over half of cases, these combined ‘don’t know’ and no-trusteesresponses were, in fact, ‘don’t knows’, while nine per cent of occupational schemes were said to havehad no trustees.

This would appear to be a reflection of the fact that many respondents were more familiar with thegeneral and some specific financial arrangements (e.g. contribution levels) of their organisations’pension provisions, but were not involved in the actual management or administration of occupationalpension schemes. As a result, they would not have necessarily known whether trustees had been putinto place to run these schemes. In this light and given that few companies would have been exemptfrom nominating trustees, it was, in fact, highly unlikely that schemes had no trustees. Respondentswho, contrary to expectation, said that schemes had no trustees might have lacked the detailedknowledge of the operations of these occupational pension schemes.

Overall, two-thirds of schemes were run by a board of individual trustees (66 per cent), while a further16 per cent were run by a sole corporate trustee (Table 7.4). These figures were little changed from2000 or, indeed, 1998.

Table 7.4 Trustee arrangements for occupational schemes

Column percentages

2003 2000 1998 – larger 1998 – small

Trustee arrangements survey survey employers (20+) employers

Board of individual trustees 66 65 63 66

Sole corporate trustee 16 14 30 12

No trustees or directors/don’t know which 18 21 7 22


As in the 2000 survey, there was considerable uncertainty or lack of knowledge with respect to thepresence and the type of trustee arrangements in the case of salary-related schemes: in nearly one-quarter of case, respondents did not know whether these schemes had trustees in place or believedthere were none (Table 7.5). Respondents appeared more aware of the type of trustee arrangementin the case of money-purchase schemes, three-quarters (75 per cent) of which were run by a board ofindividual trustees and a further fifth (21 per cent) by corporate trustees.


116

Table 7.5 Trustee arrangements for occupational schemes by type ofscheme

Column percentages


Open schemes


Trustee arrangements related purchase Other schemes All

Board of individual trustees 62 75 71 60 65

Sole corporate trustee 16 21 16 16 18

No trustees or directors/don’t know which 22 4 13 24



Number of trustees (excl. zeros and

‘don’t know’ responses)

1 6 10 2 23 14

2 2 71 86 59 57

3 – 4 67 12 3 12 20

5 – 6 14 6 5 4 6

7 + 10 1 4 2 3



Base is open and closed occupational schemes that are tax-approved.

When the number of trustees or directors was known, open salary-related schemes had more trusteesthan any of the other schemes: 91 per cent had three or more trustees/directors compared to 19 percent of money-purchase schemes, 12 per cent of other schemes and 18 per cent of closed schemes.

As on previous occasions, closer investigation of these findings, which were substantially differentfrom those reported in the Employer Pension Provision Survey of 2000, suggested that the analysishad been strongly influenced by the inclusion of two heavily-weighted schemes (one open, oneclosed) provided by the same organisation. Table B.5 in Appendix B shows the results of the analysisafter excluding these two cases.

Trustee arrangements or, at least, awareness of trustee arrangements tended to increase with thesize of organisations and coincided with a marked shift towards a greater proportion of sole corporatetrustee arrangements for schemes with 1000 or more active members (Table 7.6). The number oftrustees also increased with the size of the schemes, with all schemes with 5000 or more activemembers having at least five trustees. Overall, 53 per cent of active members were in a scheme witha board of trustees, 41 per cent were in a scheme with a sole corporate trustee, and three per centwere in a scheme where the arrangements were not known.


117

Table 7.6 Trustee arrangements for occupational schemes by size ofscheme

Column percentages


100- 250- 500- 1000-

Trustee arrangements 1-19 20-49 50-99 249 499 999 4999 5000+

Board of individual trustees 66 43 83 84 82 71 41 46

Sole corporate trustee 15 23 13 14 14 28 52 54

No trustees or directors/

don’t know which 19 33 4 3 4 1 7 0

Weighted base 115 11 4 4 2 1 2 1

Unweighted base 218 93 84 140 140 120 184 61

Number of trustees

1 18 11 * 2 3 0 1 0

2 60 15 35 4 0 0 0 0

3 – 4 20 24 41 39 18 18 10 0

5 – 6 1 42 19 44 59 46 24 12

7 – 10 0 3 5 8 14 29 43 65

11 + 0 6 0 3 6 6 22 23


Unweighted base 171 83 82 138 137 122 179 60


Note: * = less than 0.5 per cent, but more than zero.

Fifty-eight per cent of occupational schemes had at least one-third of trustees or directors nominatedby members (Table 7.7). Money-purchase schemes (68 per cent) and the mix of ‘other’ schemes (97per cent) were most likely to have had their trustees or directors nominated by members, whereasopen salary-related schemes (63 per cent) and, in particular, closed schemes (34 per cent) were leastlikely to have done so. The proportion of schemes with member-nominated trustees or directorsincreased with the size of the schemes and was highest for schemes with 5000 or more activemembers (78 per cent) (Table 7.8). It was lowest for schemes with 50 to 99 members (39 per cent).


118

Table 7.7 Number and type of trustees by type of occupational scheme

Column percentages


Open schemes



Median number of trustees 5 2 3 2 2

Mean percentage of trustees that are:

Active members of the scheme

(current employees) 70 81 38 86 75

Current pensioners of the scheme 6 27 1 24 20

Nominated by members of the scheme 31 67 95 52 65

Nominated by members and are also

pensioners 8 26 * 1 10

Percentage with at least one-third of

trustees nominated by members 63 68 97 34 58



Base is open and closed occupational schemes that are tax-approved and have at least one trustee. Note: * Less than

0.5 per cent, but more than zero.

Table 7.8 Number and type of trustees by size of occupational scheme

Cell percentages


100- 250- 500- 1000-

1-19 20-49 50-99 249 499 999 4999 5000+

Median number of trustees 2 5 3 5 6 6 8 9

Mean percentage of

trustees that are:

Active members of the

scheme (current employees) 87 57 72 65 56 62 58 66

Current pensioners of the

scheme 25 3 5 8 7 7 13 9

Nominated by members of

the scheme 74 26 20 30 24 29 35 36

Nominated by members

and are also pensioners 12 12 * 1 3 2 7 4

Percentage with at least

one-third of trustees nominated

by members 57 53 39 49 50 61 76 79


Unweighted base 171 83 83 138 138 123 179 60




119

Half of open salary-related schemes had up to five trustees, compared to just two or three in the caseof open money-purchase and ‘other’ or closed schemes (Table 7.7).

On average, in three-quarters of schemes, trustees were also active members of the occupationalschemes, which they run (Table 7.7). This proportion was highest for closed schemes (86 per cent) andopen money-purchase schemes (81 per cent). In the case of open salary-related scheme, on average,70 per cent of trustees were active members as were 38 per cent of trustees of ‘other’ open schemes.

On average, one-fifth of trustees were current pensioners of the schemes, including over one-quarter(27 per cent) of trustees of open money-purchase schemes. Across all schemes, on average, membersof the scheme had nominated 65 per cent of trustees, but this declined to just 31 per cent of opensalary-related schemes.

7.3.2 Member nominated trustee requirements

Tax-approved occupational schemes are required by law to ensure that at least one-third of theirtrustees or directors are nominated by scheme members. In 2003, 58 per cent of occupationalschemes had at least one-third of trustees or directors nominated by members, including in 63 percent of open salary-related and 68 per cent open money-purchase schemes (Table 7.7). Theproportion of schemes complying with this legal requirement was highest for the largest schemes(Table 7.8).

The 2003 survey went on to ask organisations whether they were, in fact, taking action to meet thisrequirement to have one-third of trustees or directors nominated by members. In the case of abouthalf of all schemes, respondents indicated that action had indeed been taken to allow for member-nominated trustees or directors (Table 7.9). This increased to 87 per cent of open salary-relatedschemes, but extended to only 28 per cent of money-purchase schemes and 37 per cent of closedschemes. Nearly all of ‘other’ schemes (99 per cent) had taken action to comply with this requirement.

Table 7.9 Whether any action has been taken to meet the member-nominated trustee requirements by type of scheme

Column percentages

Has any action been taken Type of occupational scheme

to enable this scheme to Open schemes

meet the member-nominated Salary- Money Closed

trustee requirements? related purchase Other schemes All

Yes 87 28 99 37 48

No 11 64 * 54 46






Respondents gave a number of reasons why trustees of schemes, which did not meet the member-nomination requirement, had not (yet) taken any action. In 18 per cent of individual – trustee-managed schemes and in 14 per cent of corporate trustee-managed schemes, respondents felt thatthis was due to the fact that the scheme was, in fact, exempt, from this requirement (Table 7.10). Inover one in five cases (22 per cent), respondents said they were not aware of this regulation, including27 per cent of schemes with individual trustee boards.


120

Table 7.10 Why no action has been taken to meet the member-nominated trustee requirements by trustee arrangements –schemes not meeting the trustee-nomination requirement

Column percentages

Board of Sole corporate

individual trustees trustee Total

No action because scheme exempt 18 14 16

No action because unaware of regulations 27 16 22

All trustees are members 1 0 1

All members are trustees 17 0 10

Scheme already meets/exceeds requirements * 0 *

Scheme closed/frozen/wound up or in process of closing 1 8 4

Not enough members in the scheme 13 17 15

Members satisfied with current arrangements 6 2 4


Other 4 34 17

Weighted base 4 3 6


Base is open and closed occupational schemes that are tax-approved and have at least one trustee but have not taken

any action to meet the member-nominated trustee requirements.

Note: * Less than 0.5 per cent, but more than zero.


121Pension rights upon divorce, survivor benefits and retirement ages

8 Pension rights upondivorce, survivor benefitsand retirement ages

8.1 Introduction

This chapter covers technical and legal issues affecting occupational pensions. First, we look at thepractice of pension sharing on divorce, reporting the incidence and frequency of pension earmarking,and attachment and sharing orders received by schemes (Section 8.2). Following that, the benefits,which pension schemes provide for legal spouses, are reviewed (Section 8.3). Finally, pensionschemes’ practice of defining retirement ages and the scope and impact on pension entitlements ofearly retirement are explored.

8.2 Pension rights upon divorce

The Welfare Reform and Pensions Act of 1999, which also introduced the stakeholder pension,modified the ways in which pension rights may be shared between former spouses after divorce.Courts have three ways in determining how the value of pension rights can be apportioned:

• offsetting – trades off the value of pension benefits against assets previously shared by thehousehold; it is not reviewed here because it is not a form of pension sharing;

• earmarking – this requires the pension scheme member to pay part of their pension to theformer spouse when the pension becomes payable. It does not apply when the former spousere-marries or the member dies; and

• pension sharing – the value of pensions is shared at the time of the divorce by order of Court.

Courts may also issue attachment orders, which require the pension scheme to pay part of themember’s pension to the former spouse.

122

8.2.1 Earmarking orders

In total, since December 2000, earmarking orders had been received with respect to two per cent ofoccupational schemes (Table 8.1). Money-purchase and closed schemes were least likely to havereceived these orders (one per cent each), while open salary-related (two per cent) and ‘other’schemes (three per cent) were more likely to have done so. Sixty-two per cent of schemes, which hadreceived earmarking orders, had received only one, 18 per cent had received two and 12 per cent hadreceived three earmarking orders. Fifty-eight per cent salary-related schemes with earmarking ordershad received one, while 20 per cent had received two earmarking orders. The incidence ofearmarking orders increased with the size of the pension scheme (Table 8.2). This appeared also to betrue for the number of earmarking orders. While intuitive, small case numbers nevertheless meantthat robust evidence to support this conclusion was not available.

Table 8.1 Earmarking orders received, by type of scheme

Column percentages


Open schemes

Scheme has received Salary- Money Closed

earmarking orders related purchase Other schemes All

Yes 2 1 3 1 2

No 96 98 92 98 97

Do not know 2 1 5 1 1


Unweighted base 338 267 117 432 1154

Base is all open and closed occupational schemes (not frozen).

Table 8.2 Earmarking orders received, by size of scheme

Column percentages


Scheme has received 100- 250- 500- 1000-

earmarking orders 1-19 20-49 50-99 249 499 999 4999 5000+

Yes * * 5 7 12 22 40 70

No 99 98 92 91 81 75 56 30

Do not know 1 2 3 2 7 3 4 0

Weighted base 122 13 5 4 2 1 2 1

Unweighted base 247 103 91 149 150 124 186 62



A small proportion of schemes had also received attachment orders, which Courts may issue if theybelieve that simple earmarking orders are an insufficient safeguard of the pension entitlement of ascheme member’s former spouse. Overall, one per cent of occupational pension schemes had beenissued an attachment order since December 2000 (Table 8.3). The majority (59 per cent) had receivedjust one such order, 19 per cent had received two, while the remainder had received three or more.Salary-related and ‘other’ occupational pension schemes appeared somewhat more likely to havereceived attachment orders, although this finding may have been affected by variable levels of ‘don’tknow’ responses.

Pension rights upon divorce, survivor benefits and retirement ages

123

Table 8.3 Asked to implement attachment orders, by type of scheme

Column percentages


Open schemes

Scheme asked to implement Salary- Money Closed

an attachment order related purchase Other schemes All

Yes 1 * 1 * 1

No 97 99 94 99 98



Unweighted base 338 267 117 432 1154



As in the case of earmarking orders, the incidence of attachment orders was higher among largerpension schemes and very few of the smallest schemes had received any such orders (Table 8.4).

Table 8.4 Asked to implement attachment orders, by size of scheme

Column percentages


Scheme asked to implement 100- 250- 500- 1000-

an attachment order 1-19 20-49 50-99 249 499 999 4999 5000+

Yes * 0 0 6 3 9 16 29

No 99 98 97 93 92 88 75 68

Don’t know 1 2 3 2 5 3 10 4

Weighted base 122 13 5 4 2 1 2 1

Unweighted base 247 103 91 149 150 124 186 62



8.2.2 Pension sharing orders

A small proportion of occupational schemes had received pension sharing orders between December2000 and early 2003. Overall, one per cent of schemes had done so, including two per cent of opensalary-related and ‘other’ schemes (Table 8.5). Just over half of all schemes (54 per cent) had receivedonly one pension sharing order, 22 per cent had received two and 14 per cent three to five sharingorders. Unsurprisingly, given the larger number of members and, therefore, potential cases, largerschemes were more likely to have received sharing orders (Table 8.6).


124

Table 8.5 Pension sharing orders received, by type of scheme

Column percentages


Open schemes

Scheme has received Salary- Money Closed

pension sharing orders related purchase Other schemes All

Yes 2 * 2 1 1

No 97 99 93 98 98



Unweighted base 338 267 117 432 1154



Table 8.6 Pension sharing orders received, by size of scheme

Column percentages


Scheme has received 100- 250- 500- 1000-

pension sharing orders 1-19 20-49 50-99 249 499 999 4999 5000+

Yes * 1 0 5 12 13 44 67

No 100 98 97 93 84 84 51 33

Don’t know * 2 3 2 4 2 5 0

Weighted base 122 13 5 4 2 1 2 1

Unweighted base 247 103 91 149 150 124 186 62



8.3 Benefits for Legal Spouses and Partners

Contracted-out occupational pension schemes must provide survivor benefits to the legal spouses ofactive members and may also provide these benefits to unmarried partners or members’ children. Incontrast, contracted-in schemes are not required to provide survivor benefits to legal spouses.

The 2003 employers’ pension survey asked providers of both types of occupational schemes whetherthey provided non-compulsory survivor benefits. Over 80 per cent of contracted-out (Table 8.7) andnearly 60 per cent of contracted-in occupational schemes (Table 8.9) did so. In the case of contracted-out occupational schemes, just under half (49 per cent) provided benefits for the children of members,although this was the case for only a quarter of money-purchase schemes (25 per cent). About a fifthof schemes (22 per cent) also provided benefits to members’ unmarried partners of the opposite sex,but only 11 per cent did so for unmarried partners of the same sex. Nearly one-third (31 per cent) ofopen salary-related, contracted-out schemes decided whether to provide benefits other than to legalspouses on a case-by-case basis. This was twice the average proportion for all schemes and over threetimes higher than in the case of money-purchase schemes.


125

Table 8.7 Non-compulsory survivor benefits provided by contracted-out occupational pension schemes, by type of scheme

Cell percentages


Open schemes


Benefits provided for: related purchase Other schemes All

Unmarried partners of the opposite sex 23 24 7 32 22

Unmarried partners of the same sex 8 23 5 16 11

Children 42 25 84 42 49

Decided on an individual basis/depends

on circumstances 31 11 1 7 15

Don’t know 28 27 14 25 24

None of these 5 37 0 27 14



Base is all open and closed occupational schemes (not frozen). Survivor benefits exclude those for legal spouses, which

are compulsory.

Table 8.8 Non-compulsory survivor benefits provided by contracted-out occupational pension schemes, by type of scheme

Cell percentages

Apart from providing benefits for legal Size of scheme

spouses, the contracted-out pension (number of active members)

occupational scheme provides benefits for: 1-19 20+ Total

Unmarried partners of the opposite sex 16 38 27

Unmarried partners of the same sex 9 20 14

Children 25 56 41

Decided on an individual basis/depends on circumstances 8 29 19


None of these 27 4 17



Base is open and closed occupational schemes (not frozen). Survivor benefits exclude those for legal spouses, which are

compulsory.

In the case of contracted-in occupational schemes, nearly half (46 per cent) provided benefits for legalspouses (Table 8.9). Only 28 per cent of money-purchase schemes provided benefits for legal spouses.Contracted-in schemes (21 per cent) were less likely than those contracted-out to provide benefits tomembers’ children (49 per cent). Five per cent of all contracted-in schemes decided survivor benefitson an individual basis.

The propensity to provide survivor benefits was greater for larger occupational pension schemes(Tables 8.8 and 8.10): 27 per cent of contracted-out schemes with less than 20 active membersprovided no survivor benefits compared to just four per cent of contracted-out schemes with 20 ormore members. Similarly, 48 per cent of contracted-in occupational schemes with less than 20 activemembers provided no survivor benefits, whereas only two per cent of larger schemes did not.


126

Table 8.9 Survivor benefits provided by contracted-in occupationalpension schemes, by type of scheme

Column percentages


Open schemes


Provides benefits for: related purchase Other schemes All

A legal (married) spouse [42] 28 [18] 45 46

Unmarried partners of the opposite sex [20] 12 [8] 8 11

Unmarried partners of the same sex [16] 9 [5] 4 6

Children [28] 12 [9] 8 21

Or are no survivors benefits provided [0] 55 [0] 48 42

Decided on an individual basis/depends

on circumstances (D) [0] 8 [5] 4 5

Don’t know [5] 8 [0] 3 7

None of these [0] 0 [0] * *






Table 8.10 Survivor benefits provided by contracted-in occupationalpension scheme, by size of scheme

Column percentages

Size of scheme

(number of active members)

Providing benefits for: 1-19 20+ Total

A legal (married) spouse 42 66 44

Unmarried partners of the opposite sex 8 28 10

Unmarried partners of the same sex 5 15 5

Children 18 45 20

Or are no survivors benefits provided 48 2 44

Decided on an individual basis/depends on circumstances (D) 3 30 5

Don’t know 7 10 7

None of these * * *






127

8.4 Retirement ages and early retirement

In Chapter 5, it was shown that 54 per cent of all occupational pension schemes had set equalretirement ages for men and women members. About half of occupational schemes with the sameretirement age for men and women had equalised their retirement ages in the last eight to ten years(Table 8.11). This included 46 per cent of open salary-related schemes and 68 per cent of ‘other’schemes, which had done so in the period between 1995 and 1999 alone. In the case of money-purchase and closed schemes, the introduction of equal retirement ages for men and womenappeared to have been a more gradual process, being spread more evenly over previous years anddecades.

Table 8.11 Retirement conditions of schemes with the same retirementage for men and women, by type of scheme

Column percentages


Open schemes



Year from which pension ages are equal

1900-1984 2 16 * 4 6

1985-1989 4 3 3 9 5

1990-1994 9 18 3 13 11

1995-1999 46 14 68 19 33

2000-2003 13 24 1 17 15

Always been equal 11 24 13 12 15

Don’t know 15 1 12 27 15

Early retirement on the grounds of ill-health

Yes 81 42 83 38 59

No 10 49 2 45 29

Depends on circumstances 5 4 2 3 4

Don’t know 4 6 13 14 9

Early retirement on other grounds

Yes 50 30 68 21 39

No 38 64 18 63 49

Depends on circumstances 10 3 2 3 5

Don’t know 2 4 13 13 8

Retirement after the specific age

Yes 86 62 23 76 68

No 10 14 2 13 11

Depends on circumstances 2 6 * * 2

Don’t know 2 17 74 10 19

Weighted base (real) 25 20 12 26 83

Unweighted base 317 244 112 386 1059

Continued


128


Column percentages


Open schemes



If retirement beyond the age the

organisation continue contributing

Yes - at the same rate as before 91 40 65 61 68

Yes - but at a lower rate than before * * * *

Yes - at a higher rate than before 0 1 0 11 4

No 8 52 18 21 23

Don’t know 1 8 16 6 5





Fifty-nine per cent of occupational schemes with equal retirement ages allowed early retirement ongrounds of ill-health, while 39 per cent of schemes allowed early retirement on other grounds. In bothinstances, salary-related (81 per cent and 50 per cent respectively) and ‘other’ schemes (83 per cent;68 per cent) were more likely to do so than money-purchase (42 per cent; 30 per cent) or closedschemes (38 per cent; 21 per cent).

Most schemes also allowed members to retire after a specific age (68 per cent). Salary-related (86 percent) and closed schemes (76 per cent) were more likely to do so than money-purchase (62 per cent)or ‘other’ schemes (23 per cent). In the vast majority of salary-related schemes (91 per cent), theemployer would continue to contribute at the same rate to these pension schemes, if members wereto decide to retire after the normal retirement age. However, this was only the case in 40 per cent ofmoney-purchase, 65 per cent of ‘other’ and 61 per cent of closed schemes. This said, 11 per cent ofclosed schemes would, in fact, continue to contribute at a higher rate than before.

Larger occupational pension schemes with the same retirement ages for men and women were lesslikely to allow early retirement on grounds other than health, less likely to allow retirement after thespecified age and, in cases of retirement after that age, were also less likely to continue to contributeto the pension scheme (Table 8.12).


129

Table 8.12 Retirement conditions of schemes with the same retirementage for men and women, by size of scheme

Column percentages

1-19 20+ Total

Year from which pension ages are equal

1900-1984 3 1 3

1985-1989 5 8 6

1990-1994 8 23 13

1995-1999 34 18 28

2000 – 2003 17 21 18

Always been equal 15 16 16


Early retirement on the grounds of ill-health

Yes 56 57 56

No 31 28 30

Depends on circumstances 1 11 5

Don’t know 13 4 9

Early retirement on other grounds

Yes 42 22 34

No 45 63 52

Depends on circumstances 2 13 6

Don’t know 11 2 8

Retirement after the specific age

Yes 78 68 74

No 8 22 13

Depends on circumstances * 7 3


Weighted base (real) 43 26 69


If retirement beyond the age the organisation continue

contributing

Yes - at the same rate as before 77 60 71

Yes - but at a lower rate than before * * *

Yes - at a higher rate than before 7 * 5

No 10 35 19

Don’t Know 5 5 6






131Conclusions

9 ConclusionsThis final chapter draws together some of the key findings from the 2003 Employers’ PensionProvision Survey.

9.1 Trends

The period since the last Employers’ Pension Provision Survey in 2000 has seen some remarkable, andat times contradictory, changes in the provision of pensions in Britain. Overall, there was no changebetween 2000 and 2003 in the proportion of organisations providing occupational pensions (sevenper cent), but an increase in the proportion providing Group Personal Pensions (from nine per cent to12 per cent). The decline in the proportion contributing to personal pension plans (from 17 per centto 15 per cent) is not statistically significant. Thirty-five per cent of organisations provided access tostakeholder pensions, which were not previously available, and five per cent provided access andcontributed to this type of pension.

By 2003, 52 per cent of organisations provided some type of pension, compared to just 29 per cent in2000. This increase was largely due to the introduction of the stakeholder pensions. However,possibly due to the small proportion of employers contributing to stakeholder pensions, itsintroduction had no notable effect on the membership of pension schemes in the workplace. This wasdespite the fact that proportionately more employees were working in organisations with some formof pension or pension access provision than had been the case in 2000. Seventeen per cent ofemployees of organisations with up to 19 employees were active members of pension schemes in2003, while the figure for active members in organisations with 20 or more employees was 44 percent.

The proportion of organisations offering specific types of pension schemes, such as occupational,group personal pensions or (contributions to) personal pensions also increased between 2000 and2003. Again, while this has led to proportionately more employees working for organisations withspecific types of pension provision, it had virtually no effect on active membership. In some instances,active membership of pension schemes declined, although the proportion of employees in organisationsproviding or contributing to these schemes had, in fact, increased.

The introduction of the stakeholder pension might have helped to maintain overall levels of activemembership of pension schemes as membership of other schemes declined.

132 Conclusions

9.2 Stakeholder pensions

Stakeholder pensions were introduced to provide people with access to a low-charge pensionscheme. In 2003, they were the type of pension most frequently offered by British private-sectororganisations. However, they were also the type of pension to which employers were least likely tocontribute (five per cent of organisations), including when compared to the 15 per cent of employerswho contributed to the more ‘traditional’ types of personal pension. Moreover, three-quarters oforganisations offering access to stakeholder pensions reported that these schemes did not have anymembers. Among those organisations which did contribute to stakeholder pensions, contributionrates and amounts tended to be smaller than among organisations contributing to other types ofpersonal pensions: proportionately fewer contributing five per cent or more of pay or £15 or more perweek to stakeholder pensions plans than contributed to other types of personal pensions. Thiscomparison between stakeholder and personal pension schemes is of interest because of the declinein active membership of private pension plans (to which employers contributed), which appeared tocoincide with the introduction and growing active membership of stakeholder pension schemes.

One in 20 of providers of access to more than one stakeholder pension had closed occupational orgroup personal pension schemes to new members before starting to offer access to stakeholderpensions.

9.3 Occupational pensions

The provision of occupational pensions underwent a major change between 2000 and 2003.Although the proportion of organisations providing occupational pensions, the size of the workforceemployed by these businesses and the proportion of the workforce who were active members ofoccupational pension schemes all increased, there were marked variations between organisations ofdifferent size and between different types of occupational pension schemes. Larger organisations (20or more employees) were generally more likely to provide occupational pensions. They were alsomore likely to record changes in provision since 2000. One key change was the increase in closures ofoccupational schemes and a simultaneous decrease in the proportion of (mainly larger) organisationscontinuing to offer salary-related pension schemes to both existing and new members. At the sametime, the proportion of larger organisations offering money-purchase schemes to new and existingmembers increased.

The effect of these changes has been a decline in the proportion of employees of larger organisationswho were active members of open salary-related schemes: declining from 24 per cent in 2000 to 16per cent in 2003. The period between the previous and the current Employers’ Pension ProvisionSurvey also appeared characterised by many closures and openings of money-purchase schemes, inparticular again among larger organisations. However, despite a resulting significant increase since2000 in the percentage of larger organisations providing open or closed money-purchase schemes,active membership of these schemes remained virtually unchanged. It is possible that this was due tosuch schemes having been intended for a small number of members only (e.g. Top Hat schemes).

There was also evidence to suggest that closures of occupational schemes coincided not with thesetting up of new occupational schemes, but with the provision of access to stakeholder pensionschemes, which have so far managed to attract little active membership. Moreover, while in manyinstances employers would have contributed to now closed occupational schemes, few employerswere found to be contributing to stakeholder pensions.

EMPLOYERS PENSION PROVISION 2003

Main Questionnaire FINAL DRAFT

Notes on conventions: • Question names in bold italic. • Questions in italic. • Answers that should be read out are in quotation marks. • Questions asked to sub-groups are indented and filter instructions should be

present. Overall contents SECTION A: ABOUT THE ORGANISATION ..................................................................................... 2 SECTION B: SELECTION OF SCHEMES ......................................................................................... 5 SECTION C STAKEHOLDER PENSION SCHEMES 1-4 ............................................................... 10 SECTION D EMPLOYER CONTRIBUTIONS TO PRIVATE STAKEHOLDER PENSIONS............ 14 SECTION E: OCCUPATIONAL SCHEMES 1 - 3............................................................................. 18 SECTION E: OCCUPATIONAL SCHEMES 4 – 10 .......................................................................... 38 SECTION F: GROUP PERSONAL PENSIONS – SCHEMES 1 - 3................................................. 40 SECTION F: GROUP PERSONAL PENSIONS – SCHEMES 4-10................................................. 43 SECTION G: PERSONAL PENSION ARRANGEMENTS................................................................ 45 SECTION H: RECENT AND PLANNED CHANGES........................................................................ 48

Section A: About the Organisation

2

SECTION A: ABOUT THE ORGANISATION INTRODUCTION My name is . . . and I am calling from BMRB, an independent research company. I am calling on behalf of the Department for Work and Pensions who are conducting research about pension provision and non-provision by private sector organisations. The Department recently wrote to you asking for your help with this research. Check that respondent has completed datasheet and has it ready for the interview. Proceed if they have. IF THEY DO NOT HAVE THE DATASHEET TO HAND, ASK IF THEY CAN GET HOLD OF IT TO GO AHEAD WITH THE INTERVIEW NOW. IF THEY HAVE LOST THEIR DATASHEET, OFFER TO SEND A NEW ONE. TAKE THEIR NAME AND ADDRESS AND PASS TO THE SUPERVISOR FOR MAILING. SHOW THIS INSTRUCTION TO ALL INTERVIEWERS ExtRef INTERVIEWER : If you have been referred to an external organisation, explain to the respondent that we are unable to do this. We have to take the information from the organisation sampled. Ask the respondent to complete the datasheet by checking any answers they are not sure about with any external organisations who may be involved with their pension arrangements. Then make an appointment to call back in a couple of days when they have done this. READ OUT TO ALL LegStat What is the nature of the business? Is it . . . ?. READ OUT.

1 A private limited company 2 A public limited company 3 A sole proprietor 4 A partnership

5 Public corporation or nationalised industry 6 Central government 7 Local authority 8 Non-profit making organisation

9 Other (Specify) 10 Don’t know (THIS IS A NEW CODE)

IF CODE 5,6 or 7, END INTERVIEW. The first few questions are referred to on your data sheet. IF (LegStat = 3 OR 4) THEN:

Numempee1 How many employees APART from yourself / the partners work in your organisation in England, Wales and Scotland (that is your whole organisation, not just your present location)? IF UNSURE, ASK FOR BEST ESTIMATE

INTERVIEWER, EXPLAIN IF NECESSARY: By employee we mean someone with a contract of employment, including outworkers, but excluding any employees of other organisations working at your premises. Include part-timers.) For sole proprietors and sole traders, we mean employees APART from the proprietor or the partners. [Data sheet Q.1]


3

TYPE IN EXACT NUMBER AND CODE – WE WILL NEED RAW DATA – CODE IS FOR CHECKING ONLY:

- 1 to 9 - 10 to 19 - 20 to 49 - 50 to 99 - 100 to 199 - 200 to 499 - 500 to 999 - 1,000 to 4,999 - 5,000 to 9,999 - 10,000 to 14,999 - 15,000 to 24,999 - 25,000+ - Don’t Know

IF Numempee1 = None then terminate interview. IF LegStat = 1,2,8,9,10 THEN:

NumEmpee2 How many employees, including yourself, work in your organisation in England, Wales and Scotland (that is your whole organisation, not just your present location)? IF UNSURE, ASK FOR BEST ESTIMATE

(INTERVIEWER, EXPLAIN IF NECESSARY: By employee we mean someone with a contract of employment, including outworkers, but excluding any employees of other organisations working at your premises. Include part-timers.) [Data sheet Q.1] TYPE IN EXACT NUMBER AND CODE – WE WILL NEED RAW DATA – CODE IS FOR CHECKING ONLY: - 1 to 9 - 10 to 19 - 20 to 49 - 50 to 99 - 100 to 199 - 200 to 499 - 500 to 999 - 1,000 to 4,999 - 5,000 to 9,999 - 10,000 to 14,999 - 15,000 to 24,999 - 25,000+ - Don’t know

FullNum How many of the employees are employed full-time, that is working 30 hours per week or more? IF UNSURE, ASK FOR BEST ESTIMATE [Data sheet Q.2] [Variable PartTime is derived from this for SPSS data and tables]. Don’t Know BUILD IN CATI CHECK FULLNUM IS <= NumEmpee.


4

FemleNum And how many employees are female? IF UNSURE, ASK FOR BEST ESTIMATE INTERVIEWER NOTE: WE ARE REFERRING TO ALL FEMALE EMPLOYEES (FULL AND PART TIME). [Data sheet Q.3] [Variable MaleNum is derived from this] Don’t Know BUILD IN CATI CHECK FULLNUM IS <= NumEmpee. YearCom In what year did this organisation commence its operations in Britain? IF UNSURE, ASK FOR BEST ESTIMATE. TYPE IN 4 DIGITS INTERVIEWER NOTE: Take earliest date that organisation commenced if mergers/takeovers etc. INTERVIEWER: Enter Pre-1901 as 1900. (Range 1900 - 2003). [Data sheet Q.4] Don’t Know

Section B: Selection of Schemes

5

SECTION B: SELECTION OF SCHEMES

READ OUT TO ALL Disp Firstly, I’d like to ask you about Stakeholder Pensions. HasSHP A stakeholder pension is a new type of pension launched in April 2001. Stakeholder pensions are a form of personal pension arranged between an individual and a pension provider such as an insurance company or a bank . Apart from other types of personal pensions or group personal pension arrangements to which the organisation may or may not contribute, does your organisation offer access to a Stakeholder pension scheme for any employees? INTERVIEWER NOTE: IF UNSURE, REPEAT INTRO.

1 Yes 2 No If (HasSHP =1) THEN:

NumSHP Does your organisation offer access to one or more than one Stakeholder pension scheme? 1. One 2. More than one 3. Don’t Know

IF (NumSHP = 2) THEN:

NumSHP2 How many stakeholder schemes does the organisation offer employees access to? RECORD NUMBER SET CATI TO BE >1

I’m now going to move on and ask you about other pension schemes your company may have in place. The first two questions ask about group personal pensions and other personal pensions. I will then ask you about occupational pension schemes. HasGpp Group personal pensions are personal pension plans that an employer has organised with an insurance company, building society or bank for a group of employees. Apart from any contributions to employees’ own personal pensions has your organisation set up or arranged a group personal pension plan for any employees? IF (HasSHP = 1) READ OUT: Please do not include the stakeholder pension plans we have just talked about. READ OUT IF NECESSARY: Group personal pensions are not private personal pensions, stakeholder pensions or occupational schemes. They are Group personal pensions arranged for a group of employees

1 Yes 2 No

IF (HasGPP=1) THEN


6

GPPPlans Do your organisation's group personal pensions involve ... READ OUT ..SINGLECODE ONLY

1 "a single plan for a group of employees with an insurance company, bank or building society," 2 "or more than one plan?"

IF (GPPPlans=2) THEN NumPlans How many plans are there? WRITE IN NUMBER – 2 DIGITS MAX

HasApp Some of your employees may have their own personal pension in place. Personal pensions are a form of private pension arrangement between an individual and and a pension provider. These are personal pensions that are NOT a stakeholder or part of a group personal pension. Does your organisation contribute to the personal pension plans of any employees? IF (HasSHP = 1) AND (HasGpp = 2 OR DK) READ OUT: Please do not include the stakeholder pension plans we have just talked about. IF (HasSHP = 1 AND HasGpp = 1) READ OUT: Please do not include the stakeholder pension plans and Group Personal pension plans we have just talked about. IF (HasSHP = 2 OR DK) AND (HasGpp = 1) READ OUT: Please do not include the Group Personal pension plans we have just talked about.

1 Yes 2 No

ASK ALL READ OUT "Now I would like to ask about any occupational pension provision that your organisation makes for its employees, including senior managers and directors. Please include all occupational schemes, whether or not the company contributes. Please include all open, closed and frozen schemes." OccSchme Apart from any personal pensions, group personal pension or stakeholder pension arrangements to which the organisation may or may not contribute, has your organisation set up or arranged an occupational pension scheme for any employees? 1 Yes 2 No IF (OccSchme=1) THEN

TopHat Were any of these schemes established solely for senior managers or directors? Such schemes are commonly known as top hat schemes IF UNSURE: THESE ARE SCHEMES SET UP SEPARATELY FOR SENIOR MANAGERS OR DIRECTORS AND NO OTHER STAFF.

1 Yes 2 No


7

ASK ALL NoNewOcc Apart from wound up schemes, does your organisation have any closed or frozen occupational pension schemes? IF UNSURE READ OUT: CLOSED SCHEMES: Occupational pension schemes where no new members are allowed to join but contributions may still be made by existing members and/or their employer. FROZEN SCHEMES: Occupational pension schemes where no new members are allowed to join and generally, no contributions are being or will ever be made by members and/or the employer. WOUND UP SCHEMES: Have no members and the assets of the scheme have been used towards meeting the scheme’s liabilities.

1 Yes 2 No

NumOccs Can I just check, how many occupational pension schemes are there in total, that is excluding Group Personal Pensions, personal pensions or stakeholder pensions? Please include ALL occupational schemes, including closed or frozen schemes. WRITE IN EXACT NUMBER (2 DIGITS MAX) BUILD IN CHECK: IF NumOccs=0 You mentioned that your organisation has not set up or arranged an occupational scheme for any employees, including any closed or frozen occupational pension schemes. Can I just re-check this with you again. ASK OccSchme - NoNewOcc AGAIN (IF HasSHP = 1 OR HasGpp = 1 OR HasApp = 1 OR NumOccs = 1 OR NoNewOcc = 1) CHECK CHECK SCREEN: May I just check, you said you have the following schemes is that correct? XX Stakeholder schemes XX Group Personal Pension plans (No) Contributions to employees private personal pensions XX Occupational schemes 1 Yes – All correct 2 Change stakeholder schemes 3 Change Group Personal Pension Plan(s) 4 Change contributions to private personal pensions 5 Change occupational schemes

IF (HasSHP = 2 OR DK) AND (OccSchme=2 OR DK) AND (HasAPP=2 OR DK) AND (HasGPP=2 OR DK) AND (NoNewOCS = 2 OR DK)THEN: ChkProv

Can I confirm there is no pension provision of any kind for any employees of your organisation in Great Britain, including any frozen or closed schemes, or pension provision that is restricted to the most senior directors or to employees at a particular location or a subsidiary company. Is this correct?

1 Yes 2 No, not sure GO TO (MakeApp – interview will start again at Legstat)


8

IF (ChkProv=1) THEN WhyNoPen1 What would you say is the main reason why your organisation does not contribute to employees' pensions? DO NOT PROMPT SINGLECODE ONLY 1. Organisation is too small 2. Employees earnings below National Insurance lower earnings limit 3. Too costly to provide pensions / cannot afford at moment 4. Organisation has only recently been established / organisation is too new 5. Mainly part-time or temporary staff 6. Staff don’t want pensions / have never asked for a pension scheme 7. Staff turnover is too high / employees don’t stay long enough to make it

worthwhile 8. Only a family business 9. It is the responsibility of employees, not the employer 10. Pensions are too complicated / too much administration or legislation involved 11. It is not company policy to provide pensions 12. Other answers (Specify) 13. Don’t Know MASK ANSWER AT WHYNOPEN1 WhyNoPen2 Are there any other reasons why your organisation does not contribute to employees' pensions? CODE UP TO 4 RESPONSES. SET CATI 1. Organisation is too small 2. Employees earnings below National Insurance lower earnings limit 3. Too costly to provide pensions / cannot afford at moment 4. Organisation has only recently been established / organisation is too new 5. Mainly part-time or temporary staff 6. Staff don’t want pensions / have never asked for a pension scheme 7. Staff turnover is too high / employees don’t stay long enough to make it

worthwhile 8. Only a family business 9. It is the responsibility of employees, not the employer 10. Pensions are too complicated / too much administration or legislation involved 11. It is not company policy to provide pensions 12. Other answers (Specify) 13. Don’t Know IF (ChkProv=1) THEN NonChnge To your knowledge, has this organisation seriously considered introducing some form of pension provision for its employees?

1 Yes 2 No 3 Don’t know

IF (NonChnge=1) THEN NonFive Do you think such a move will occur in the next five years,?


INTERVIEWER :


9

If you have been referred to an external organisation, explain to the respondent that we are unable to do this. We have to take the information from the organisation sampled. Ask the respondent to complete the datasheet by checking any answers they are not sure about with any external organisations who may be involved with their pension arrangements. Then make an appointment to call back in a couple of days when they have done this.


10

(Section C is repeated once for each stakeholder scheme up to a maximum of 4 schemes. The intention is that the schemes are covered in descending order of size in terms of current active scheme members. Only the first four schemes are covered. ) Note only – does not appear on screen. SECTION C STAKEHOLDER PENSION SCHEMES 1-4 ASK If hasshp=1 NUMBER OF TIMES THEY GO THROUGH THIS LOOP WILL BE DETERMINED BY RESPONSE AT NUMSHP, BUT MAX OF 4 TIMES. NumSHP2 >0 READ OUT I’d like to ask you some more questions about the stakeholder pension scheme(s) your company offers access to. I just need to ask about Stakeholder schemes for the moment and NOT other types of personal pensions or group personal pensions. SHPPROV IF NumSHP = 1 THEN: You said that the organisation offers access to onestakeholder pension scheme. What is the stakeholder scheme called? WRITE IN INTERVIEWER NOTE: MOST STAKEHOLDER PENSION SCHEMES HAVE A NAME. IF RESPONDENT DOESN’T KNOW THIS ASK THEM HOW THEY IDENTIFY SCHEMES AND ENTER THIS. NEED TO ADD A NAME OR UNIQUE IDENTIFIER SO THAT WE KNOW WHICH SCHEME WE ARE REFERRING TO IN LATER SECTIONS. (Text =100 characters) Don’t know IF NumSHP = >2 THEN:

You said that the organisation s offers access to ($NUMSHP2) stakeholder pension schemes. What is the largest (/2nd largest/3rd largest/4th largest) stakeholder scheme called? WRITE IN INTERVIEWER: “largest” in terms of the number of current scheme members (Text =100 characters) Don’t Know

IF NumSHP = 2 THEN: READ OUT: I’d like to ask you some questions about (enter name of largest SHP at SHPPROV)

ASK If hasshp=1

SHPYR In which year did the organisation first offer access to this stakeholder pension scheme? READ OUT IF NECESSARY: Stakeholder schemes were introduced in 2001. IF UNSURE, GET BEST ESTIMATE INTERVIEWER: ENTER YEAR. Enter Full year: e.g. 2001. Set CATI to 4 digits. CATI set to range 2001 - 2003

MEMSHP


11

How many CURRENT employees participate in this stakeholder pension scheme? Please do not include other types of personal pensions or group personal pension arrangements or occupational schemes. [IF UNSURE, GET BEST ESTIMATE] ENTER NUMBER: Range 0 - 999999 ADD IN CHECK SO THAT ANSWER IS <= Numempee1 or Numempee.

IF MEMSHP = 0 THEN GO TO SHPPre IF MEMSHP > 0 OR MEMSHP = DK

CONSHP1 May I check, does your organisation contribute to this stakeholder pension scheme for any employees?

1 Yes 2 No 3 Don’t Know

IF (CONSHP1 = 1) THEN

SHPCont For how many employees does the organisation contribute to this stakeholder pension plan? Please do not include other types of personal pensions or group personal pension arrangements [IF UNSURE, GET BEST ESTIMATE]

ENTER NUMBER: 0 - 999999 [Data Sheet Q5]

SHPMIN1 What is the minimum rate at which the organisation contributes to /this stakeholder pension plan? IF UNSURE , GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. INTERVIEWER NOTE: IF CODE 1 OR 2, CHECK IF THERE IS A MINIMUM OR MAXIMUM OR WHETHER THERE IS A FIXED PAYMENT. IF NO MINIMUM OR MAXIMUM, CODE EITHER 3 OR 4 DEPENDING ON WHETHER A % OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money 3 Fixed proportion of pay (%) – no minimum or maximum 4 Fixed amount of money - no minimum or maximum. 5 Don’t Know

SHPMin2 ENTER ANSWER.

IF (SHPMin1=2 or SHPMin1=4) THEN

SHPMin3 What period does this payment cover? SINGLECODE DO NOT READ OUT. INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE 1 Per week


12

2 Per 4 weeks 3 Per calendar month 4 Per year 6 Other (Specify) 7 Don’t Know

IF (SHPMin1=1 OR SHPMin1=2) THEN SHPMax What is the maximum rate at which the organisation contributes to this stakeholder pension plan? INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money 3 Don’t Know

SHPMax2 ENTER ANSWER.

IF (SHPMax1=2) THEN SHPMax3 What period does this payment cover? SINGLECODE

INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 4 Other (Specify) 5 Don’t Know

ASK ALL IF CONShp = 1: SHPAve What is the average rate your organisation has contributed to this stakeholder pension plan since the scheme was set up? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money 3 Don’t Know

SHPAve2 ENTER ANSWER. IF (SHPAve1=2) THEN SHPAve3 What period does this payment cover? SINGLECODE

INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify) 6 Don’t Know


13

IF (HasSHP = 1) THEN; Ask ONCE ONLY if NUMSHP2>1 SHPPre Before introducing access for employees to a stakeholder pension scheme, did the organisation make any other form of pension provision for the employees concerned? 1 Yes 2 No 3 Don’t know

IF (SHPPre=1) THEN SHPClo Was this ... READ OUT ... MULTICODE READ OUT ALL OPTIONS AT ONCE AND THEN CODE ALL THAT APPLY. IF NONE OF THESE CODE NULL 1 "via an occupational scheme that still admits new members?" 2 “via an occupational scheme that is now closed to new members," 3 or via a group personal pension scheme that is still open to new members?” 4 Other (please specify) 5 NULL – 6 Don’t Know


14

SECTION D – EMPLOYER CONTRIBUTIONS TO PRIVATE STAKEHOLDER PENSIONS (NOT SPECIFIC TO COMPANY SCHEME)

(This section is not specific to any stakeholder scheme that the company may provide access to. Therefore the next section of questions on contributions will be asked OUTSIDE of the loop of questions above that relate to specific shp’s the company may provide. )

If (hasshp=1) THEN: Ppayroll Some of your employees may have joined a stakeholder scheme privately – that is separately from the scheme your organisation provides access to. Do you currently arrange payroll deductions on behalf of employees where they have arranged their own stakeholder pensionscheme?


If (hasshp=1) AND (Ppayroll=1) THEN: Conshp2

As well as making payroll deductions for employees who have joined a stakeholder scheme privately - that is separate from the scheme you provide access to, does your organisation make contributions towards the stakeholder pension plans for any these employees?


IF (Conshp2 = 1) THEN:

Promin1 What is the minimum rate at which the organisation contributes to these stakeholder pension plans? IF UNSURE , GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. IF CODE 1 OR 2 CHECK IF THERE IS A MINIMUM OR MAXIMUM OR WHETHER THERE IS A FIXED PAYMENT. IF NO MINIMUM OR MAXIMUM, CODE EITHER 3 OR 4 DEPENDING ON WHETHER A % OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money 3 Fixed proportion of pay (%) – no minimum or maximum 4 Fixed amount of money - no minimum or maximum. 5 Don’t Know

Promin2 ENTER ANSWER.

IF (Promin1=2 or Promin1 =4) THEN Promin3 What period does this payment cover? SINGLECODE

INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE 1 Per week


15

2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify)

IF (Promin1=1 OR Promin1=2) THEN

ProMax1 What is the maximum rate at which the organisation contributes to these stakeholder pension plans? INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money 3 Don’t Know

ProMax2 ENTER ANSWER.

IF (Promax1=2) THEN

Promax3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 4 Other (Specify) 5 Don’t Know

IF (IF (Conshp2 = 1) THEN:

ProAve1 What is the average rate your organisation has contributed to these stakeholder pension plans since you started contributing to them? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money 3 Don’t Know

ProAve2 ENTER ANSWER. IF (ProAve1=2) THEN

ProAve3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify) 6 Don’t Know

If (hasshp=2) THEN:


16

Nppayrol Although your organisation does not offer access to a stakeholder pension scheme, some of your employees may have joined a stakeholder pension scheme privately. Do you currently arrange payroll deductions on behalf of employees where they have arranged their own stakeholder pension schemes? 1 Yes 2 No 3 Don’t know

(if hasshp=2 and Nppayrol=1):

CONSHP3 As well as making payroll deductions for employees who have joined a stakeholder scheme privately, does your organisation make contributions towards these stakeholder pension plans for any of these employees?


IF (CONSHP3 = 1) THEN:

Npmin1 What is the minimum rate at which the organisation contributes to these stakeholder pension plans? IF UNSURE , GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. 1 Proportion of pay (%) 2 Amount of money 3 Fixed proportion of pay (%) – no minimum or maximum 4 Fixed amount of money - no minimum or maximum.

Npmin2 ENTER ANSWER.

IF (Npmin1=2 or Npmin1 =4) THEN

Npmin3 What period does this payment cover? SINGLECODE 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify)

IF (Npmin1=1 OR Npmin1=2) THEN NpMax1 What is the maximum rate at which the organisation contributes to these stakeholder pension plans? INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money

NpMax2 ENTER ANSWER.

IF (Npmax1=2) THEN


17

Npmax3 What period does this payment cover? SINGLECODE 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify)

IF (CONSHP3 = 1) THEN THEN:

NPAve What is the average rate your organisation has contributed to these stakeholder pension plans since you started contributing to them (since the scheme was set up)? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. 1 Proportion of pay (%) 2 Amount of money

NPAve2 ENTER ANSWER. IF (SHPAve1=2) THEN

NPAve3 What period does this payment cover? SINGLECODE 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify)

Section C: Occupational Schemes – Schemes 1 - 3

18

(Section E is repeated once for each occupational scheme up to a maximum of 10 schemes. The intention is that the schemes are covered in descending order of size in terms of current active scheme members. Only the first three schemes are covered in full. A ‘cut down’ set of questions is used for the fourth and any subsequent schemes.) NOTE ONLY SECTION E: OCCUPATIONAL SCHEMES 1 - 3 ASK IF NumOccs>0. NUMBER OF TIMES THEY GO THROUGH THIS LOOP IS DETERMINED BY RESPONSE AT (NumOccs), BUT MAX OF 3 TIMES) READ OUT The next series of questions is about your organisation's occupational pension scheme(s). That is, EXCLUDING any stakeholder pensions, personal pensions and group personal pensions you provide. OcName What is the largest (/2nd largest/3rd largest) scheme called? WRITE IN IF NUMOCS >1 READ OUT: I’d now like to ask you about the scheme known as (name of scheme at Ocname2)…. OccYr When was the scheme established? IF UNSURE, GET BEST ESTIMATE. TYPE IN 4 DIGITS INTERVIEWER : Enter year. Code pre-1901 as 1900. (Range 1900 - 2003). [Data sheet Q.8 ] NewMem Can I check, is THIS scheme currently open to new members to join?

1 Yes 2 No

IF (NewMem=2) THEN HowCld Is this scheme ... READ OUT ... SINGLECODE (READ OUT IF NECESSARY : By contributions I mean contributions made by employee or employer) 1 "one into which any contributions are still being paid," 2 "one into which no contributions are paid at present, but might be in the future," 3 "or, a scheme into which no further contributions are being paid now or at any time in the

future?" IF CLOSED BEFORE 1999 CODE “DK EXACTLY BUT OVER 4 YEARS AGO”

YrClos When was this scheme closed to new members?

1 1999 2 2000 3 2001 4 2002 5 2003 6 Don’t know exactly, but within last 4 years 7 Don’t Know exactly but over 4 years ago 8 Don’t Know


19

IF (YrClos=>1 AND YrClos<=5) THEN WhyClo Why was the scheme closed to new members? Prompt: Anything else?

CODE UP TO 5 ANSWERS. SET CATI 1 Scheme too expensive to run 2 Not enough money to meet liabilities 3 Wanted to switch to Group Personal Pension or personal pensions 4 Wanted to switch to defined contribution (or money purchase) scheme 5 Wanted to switch to a Stakeholder pension scheme 6 Set up new or other scheme (unspecified) 7 Recent/anticipated changes to pension legislation or tax arrangements 8 Recent changes to accounting practices (E.G. FRS 17 or FRS19) 9 Change of ownership of organisation - organisation merged or was taken over 10 Previous scheme was not attractive – wanted to provide better benefits 11 Too much administration involved / make administration easier 12 Not enough members / reduction in workforce 13 High staff turnover 14 Other answers (Specify)

IF (OccYr IN [1996..2003]) AND (NewMem=1) THEN RepSch Did it replace, or add to, an earlier scheme?

1 Replaced an earlier scheme 2 Add to an earlier scheme

ASK ALL IN OCCUPATIONAL LOOP Insured Is this occupational scheme insured, that is where the retirement benefits are secured solely by insurance policies or annuity contracts, and which is also managed by the insurance company?

1 Yes 2 No

SchMem Now thinking about the membership of this scheme. How many current employees, including senior managers and directors, are active members of the scheme? Please do not include deferred & retired pensioners. IF UNSURE, GET BEST ESTIMATE READ OUT IF NECESSARY: Active members are current employees who belong to the scheme. Deferred pensioners (or deferred members) are people who were members of an occupational pension scheme and who have now left it, usually because they have joined a new employer. Contributions are no longer being made into the scheme either by the member or the employer. The rights are frozen or retained in the scheme until they are drawn as a pension or transferred to a new pension scheme. [Data sheet Q.9 ] ADD IN CHECK SO THAT NUMBER <= NumEmpee or Numempee1 IF (SchMem <> 0) THEN

MemFul Of these, how many are full-time employees? IF UNSURE, GET BEST ESTIMATE [Hidden derived variable: NumPrt (number of part-time employees) ] [Data sheet Q.10]

ADD IN CHECK SO THAT NUMBER <= Fullnum NumWmn How many active members are women? IF UNSURE, GET BEST ESTIMATE [Hidden derived variable: NumMen (number of male employees) ]


20

[Data sheet Q.11] ADD IN CHECK SO THAT NUMBER <= FemaleNum. DefPen How many deferred pensioners are there in the scheme? IF UNSURE GET BEST ESTIMATE READ OUT : Deferred pensioners (or deferred members) are people who were members of an occupational pension scheme and who have now left it, usually because they have joined a new employer. Contributions are no longer being made into the scheme either by the member or the employer. The rights are frozen or retained in the scheme until they are drawn as a pension or transferred to a new pension scheme. [Data sheet Q.12] CurPen How many current pensioners, that is pensions in payment, are there in the scheme? INCLUDE BENEFITS PAID TO SURVIVORS (e.g. WIDOW(ER)S AND DEPENDANTS) READ OUT IF NECESSARY : Current pensioners are people who are currently receiving a pension. [Data sheet Q.13]

IF (NewMem=1) THEN SchOpn Is the scheme open to all employees, or can only certain types of employee join? INTERVIEWER NOTE : Code in priority order, 1 is highest Single code only.

1 All employees in organisation, 2 Senior management only, 3 White collar /staff employees only, 4 Blue collar / works employees only, 5 All employees in a particular subsidiaries of the organisation, 6 Only those invited to join 7 All in particular business group/activity (e.g. employees in our insurance firms) 8 Hourly or weekly paid employees (not white collar staff) 9 All employees under a certain age 10 All employees over a certain age 11 All employees up to senior management level/all employees except for senior

managers or directors 12 All employees with a minimum length of service

13 Some other group of employees (Specify) ASK ALL TaxApp Is the scheme tax-approved? READ OUT: Schemes that are not tax-approved provide benefits for employees in excess of the tax limit for earnings. These schemes are also unlikely to have trustees (however, they may do so).

1 Yes 2 No 3 Don’t know IF (TaxApp = 1) THEN:

OCCLPI Each year, occupational pension schemes are required to increase pensions in payment that were accrued since 1997. The minimum increase must be the rate of inflation or 5%, whichever is the lower. Does this scheme increase such pensions by more than the required minimum? 1. Yes 2. No 3. Don’t Know


21

IF TAXAPP = 1

IndCorp Is there a board of individual trustees or a sole corporate trustee? SINGLECODE READ OUT IF NECESSARY: A sole corporate trustee is a company with directors who act in the same way as trustees. In some cases a board of individual trustees may include a corporate trustee. (INTERVIEWER NOTEThese should be coded as a board of individual trustees)

1 Board of individual trustees 2 Sole corporate trustee 3 Neither - scheme has no trustees or directors

IF (TaxApp=1) AND (IndCorp=1 OR IndCorp=2) THEN Truste Now regarding trustees or directors. How many trustees or directors does the scheme have? IF UNSURE GET ESTIMATE [Data sheet Q.20/Q.21]

IF (Truste > 0 TruCur How many of these trustees or directors, if any, are current employees who are active members of the scheme? IF UNSURE, GET ESTIMATE [Data sheet Q.16a] ADD IN CHECK SO THAT NUMBER IS <= Truste TruPen1 How many trustees or directors are pensioners of the scheme, that is people currently receiving a pension from the scheme? IF UNSURE, GET ESTIMATE [Data sheet Q.16b] ADD IN CHECK SO THAT NUMBER IS <= Truste TruApp And how many trustees or directors, if any, are nominated by members of the scheme? IF UNSURE, GET ESTIMATE [Data sheet Q.16c] ADD IN CHECK SO THAT NUMBER IS <= Truste

IF (TruApp > 0) THEN TruPen2 How many trustees or directors who are nominated by scheme members are also pensioners? IF UNSURE, GET ESTIMATE

IF (Truste > 0) THEN MNTRte Members of occupational pension schemes must now be allowed to choose at least one-third of the scheme's trustees or directors, or to approve alternative arrangements. Has any action been taken to enable this scheme to meet the member-nominated trustee or director requirements?


IF (MNTRte=2) THEN MNTNo Why is this? SINGLECODE

1 Exempt No action because scheme exempt 2 Unawa No action because unaware of regulations


22

3 Other Other answer (Specify) ASK ALL IN OCCUPATIONAL LOOP SERPS Is the scheme contracted out of SERPS (now known as second state pension) or not contracted out? ... READ OUT ... SINGLECODE

1 "contracted out of SERPS or , now known as second state pension," 2 "or, not contracted out? ('contracted in')" 3 (Part contracted-in, part contracted-out) – DO NOT READ OUT IF UNSURE: CONTRACTED IN: Employer and employee pay full national insurance contributions because members accumulate rights to the state earnings related pension scheme (SERPS, the top up to the basic state pension, now known as second state pension. CONTRACTED OUT: Employer and employee pay lower national insurance rates because members are NOT accumulating rights to the state earnings related pension scheme (SERPS, the top up to the basic state pension, , now known as second state pension.

ASK ALL SchTyp And is the scheme ... READ OUT ...

1 "a salary-related scheme" (Defined Benefit) 2 "a money-purchase scheme" (Defined contribution) 3 “or, a scheme where benefits are calculated using both methods?" 4 Other (Specify) 5 Don’t know

INTERVIEWER: Definitions in box on page 2 of datasheet. EXPLAIN IF NECESSARY: In salary-related (or defined benefit) schemes, benefits are based on length of service and final salary. In money-purchase (or defined contribution) schemes, benefits are based on contributions made and investment returns during membership. [Datasheet Q.18

IF (SchTyp=2) THEN NewQ6a This is a money-purchase scheme. Can I just check, does the scheme provide any benefits on a salary-related basis?

1 Yes 2 No

IF (SchTyp=1) THEN NewQ6b This is a salary-related scheme. Can I just check, does the scheme provide any benefits on a money-purchase basis?

1 Yes 2 No

IF (SchTyp=3 OR SchTyp=4) THEN BenBas Can I just check, are benefits calculated...READ OUT...SINGLECODE

1 "...on a salary-related basis" 2 "...on a money purchase basis?" 3 Or Both 4 Other (Specify)

IF (SERPS=1 OR SERPS=3) AND (SchTyp=3 OR SchTyp=4) THEN ConBas Can I just check, is the scheme contracted out on...SINGLECODE READ OUT...

1 "...a money purchase basis" 2 "...or a salary-related basis?"


23

IF (SERPS=1 OR SERPS=3) THEN EXPLAIN ONCE ONLY – FIRST TIME ASKED.

From 1997 schemes have been able to contract out on a mixed benefit basis, which means that some members can be in a contracted-out salary-related section and others in a contracted-out money-purchase section of the same scheme. Members are able to transfer between the two sections of the scheme. END OF ONCE-ONLY LOOP. COMBS Is the scheme contracted-out on a mixed benefit basis?

1 Yes 2 No

IF (COMBS=1) THEN WhnCMBS When did the scheme start to contract out on a mixed benefit basis? INTERVIEWER: If before “1997”, then code “5”

1 1997 2 1998 3 1999 4 2000 5 2001 6 2002 7 2003 8 Don’t know exactly, but within 3 years

WhyCMBS Why has the scheme chosen to do this? Prompt: Anything else? CODE UP TO 5 ANSWERS – SET CATI

1 Actuarial advice 2 Scheme members choice 3 Financially advantageous for employees 4 Financially advantageous for employer 5 Other answer (Specify)

IF (SERPS=1 OR SERPS=3) THEN:

SurBen As you may know, on the death of a member, contracted-out occupational pension schemes are required to provide benefits for surviving spouses to ensure adequate levels of income. These are known as survivor’s benefits. Apart from providing survivors benefits for legal spouses, does this pension scheme provide benefits for…. READ OUT, (EXCEPT NONE OF THESE AND DECIDED ON AN INDIVIDUAL BASIS / DEPENDS ON CIRCUMSTANCES). CODE ALL THAT APPLY .

1. Unmarried partners of the opposite sex 2. Unmarried partners of the same sex 3. Children 4. Decided on an individual basis / depends on circumstances (DO NOT READ OUT) 5. None of these (DO NOT READ OUT) 6. Don’t know

IF (SERPS = 2) THEN:


24

SurBenIn

As you may know, on the death of a member, contracted-out occupational pension schemes are required to provide benefits for surviving spouses to ensure adequate levels of income. As a contracted-in scheme, does this pension scheme provide benefits for…. READ OUT, (EXCEPT NONE OF THESE AND DECIDED ON AN INDIVIDUAL BASIS / DEPENDS ON CIRCUMSTANCES). CODE ALL THAT APPLY.

1. A legal (married) spouse 2. Unmarried partners of the opposite sex 3. Unmarried partners of the same sex 4. Children 5. Or are no survivors benefits provided? 7. Decided on an individual basis / depends on circumstances (DO NOT READ OUT) 6. Don’t know IF (NewMem=1 OR (NewMem=2 AND (HowCld=1 OR HowCld=2)) THEN ContRB Is the scheme ... READ OUT ... SINGLECODE READ OUT IF NECESSARY: By contributory we mean that members pay contributions into the scheme, other than for additional voluntary contributions (AVC’s) or optional benefits.

1 "contributory, that is do its members normally pay contributions," 2 "or, is the scheme normally non-contributory?"

IF (ContRB=1) THEN DBBase Are employees' contributions ... READ OUT ...SINGLECODE

1 "...a fixed percentage of pay (or pensionable pay) which is the same for all members," 2 "...a percentage of pay (or pensionable pay) which varies between different categories

of employees (e.g. by job, salary)," 3 “...a percentage of pay (or pensionable pay) which individuals themselves can choose to

vary" 4 "...or, a flat rate payment?" 5 Other (Specify)

IF (DBBase=2) THEN NumGrps How many different contribution rates are there?

ENTER NUMBER (RANGE: 2-10)

[* - loop through on NumGrps to a max of 3] ConGrp1 Thinking first about the largest category of employees, what is the contribution rate for this group? IF UNSURE GET BEST ESTIMATE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. [Data sheet Q.15]

1 Proportion of pay (%) 2 Amount of money

ConGrp2 ENTER ANSWER. If (ConGrp1=2) THEN ConGrp3


25

What period does this payment cover? 1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify)

[END OF NumGrps LOOP – REPEAT UP TO 3 TIMES IN TOTAL DEPENDING ON RESPONSE AT “NumGrps” ABOVE] IF (DBBase=3 OR DBBase=5)) THEN ConMin1 Now I would like to ask some more questions about scheme members' contributions as a percentage of pay (or pensionable pay). I’m interested in ACTUAL contributations made, rather than POSSIBLE contributions. What is the minimum rate at which scheme members contribute? IF UNSURE, GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. IF CODE 1 OR 2 CHECK WHETHER THERE IS A MINIMUM OR MAXIMUM OR WHETHER THERE IS A FIXED PAYMENT. IF NO MIN / MAX, CODE EITHER 3 OR 4 DEPENDING ON WHETHER A % OR AN AMOUNT OF MONEY.

1 Proportion of pay (%) 2 Amount of money 3 Fixed proportion of pay (%) – no minimum or maximum 4 Fixed amount of money - no minimum or maximum.

ConMin2 ENTER ANSWER.

IF (ConMin1=2 or ConMin1=4) THEN ConMin3 What period does this payment cover?

1 Per week 2 Per 4 weeks 3 Per calendar month 4 Per year 5 Other (Specify)

IF (ConMin1=1 OR ConMin1=2) THEN

ConMax1 What is the maximum rate at which scheme members contribute? IF NECESSARY: Again, I’m interested in ACTUAL contributations made, rather than POSSIBLE contributions.

IF UNSURE GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. [Data sheet Q.15]


ConMax2 ENTER ANSWER.


26

IF (ConMax1=2) THEN ConMax3 What period does this payment cover?


ConAve1 And what is the average rate at which scheme members contributed in the last 3 years/since the scheme was set up? IF UNSURE GET BEST ESTIMATE

INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. [Data sheet Q.15]


ConAve2

ENTER ANSWER

IF (ConAve1=2) THEN ConAve3 What period does this payment cover?


IF (DBBase=1) THEN ConFix1 What is the scheme members' contribution as a percentage of earnings (the contribution rate)? IF UNSURE, GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. [Data sheet Q 19]


ConFix2

ENTER ANSWER

IF (ConFix1=2) THEN ConFix3 What period does this payment cover? SINGLECODE



27

IF (DBBase=4) THEN FltRte1 What is the scheme members' contribution as a flat rate payment? IF UNSURE, GET BEST ESTIMATE. SINGLECODE INTERVIEWER NOTE : if varies, ask: What is the flat rate among the main groups of members? INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY, AND WHETHER THIS VARIES. [Data sheet Q.15]

1 Proportion of pay (%) – does not vary 2 Proportion of pay (%) – varies 3 Amount of money – does not vary 4 Amount of money – varies

FltRte2

ENTER ANSWER.

IF (FltRte1=3 or FltRte1=4) THEN FltPer What period does this payment cover? SINGLECODE


IF ContRB = 1 AND ((SERPS=1 OR SERPS=3) AND ((SchTyp=2) OR (ConBas=1)) THEN NIMemb Is members' share of the National Insurance rebate, that is the flat rate rebate, payable in addition to these contributions, or have you included it? SINGLECODE READ OUT IF NECESSARY: This question does not apply to the age-related payment made separately by the DSS to the scheme after the end of the tax year. It applies only to the flat-rate percentage rebates to employers' and employees' National Insurance contributions.

1 Payable in addition 2 Included 3 Not applicable

Now moving on to talk about contributions made by the organisationto this occupational pension scheme.

IF (HowCld <> 3) AND (COMBS<>1) AND ((SchTyp=1) OR (BenBas=1)) THEN LstCon May I just check, in the last financial year did the organisation…READ OUT SINGLECODE

1 "contribute at its normal rate to the scheme," 2 "increase the amount contributed," 3 "reduce the amount contributed," 4 "or, did the organisation have a contributions holiday?"

IF (LstCon=2 or LstCon=3 or LstCon=4) THEN HolRte1 What would be the organisation's normal contribution rate as a percentage of the payroll costs of an active member? IF UNSURE, GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. [Data sheet Q.16]


HolRte2 ENTER ANSWER.


28

If (HolRte1=2) THEN HolRte3 What period does this payment cover? SINGLECODE


IF (LstCon=1) THEN Rte1 What was the organisation's contribution rate in the last financial year as a percentage of the payroll costs of an active member? IF UNSURE GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY. [Data sheet Q.16]


Rte2 ENTER ANSWER

If (Rte1=2) THEN Rte3 What period does this payment cover? SINGLECODE


IF NEWMEM = 1 OR ((NEWMEM = 2) AND (HOWCLD = 1 OR HOWCLD = 2))

Min1 What is the minimum rate at which the organisation contributes to the scheme as a percentage of the payroll costs of an active member? IF UNSURE, GET BEST ESTIMATE. INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. [Data sheet Q.16]


Min2 ENTER ANSWER

IF (Min1=2 or Min1=4) THEN Min3 What period does this payment cover? SINGLECODE



29

IF (Min1=1 OR Min1=2) THEN Max1 What is the maximum rate at which the organisation contributes to the scheme? IF UNSURE, GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. [Data sheet Q.16]


Max2 ENTER ANSWER. IF (Max1=2) THEN

Max3 What period does this payment cover? SINGLECODE


Ave1 And what is the average rate your organisation has contributed to the scheme in the last 3 years/(since the scheme was set up)? READ OUT IF NECESSARY: We are referring to the contributions made in the last 3 years from this date and NOT the last 3 financial years. IF UNSURE, GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. [Data sheet Q.16]


Ave2 ENTER ANSWER.

IF (Ave1=2 OR Ave1=4) THEN Ave3 What period does this payment cover? INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE


IF ((SERPS =1 OR SERPS=3) AND ((SchTyp=2) OR (ConBas=1))) THEN NIEmp Is your organisation's share of the NI rebate, that is the flat rate rebate, payable in addition to these contributions or have you included it? SINGLECODE READ OUT IF NECESSARY: This question does not apply to the age- related payment made separately by the DSS to the scheme after the end of the tax year. It applies only to the flat-rate percentage rebates to employers' and employees' NI contributions.

1 Payable in addition 2 Included 3 Not applicable


30

1. IF (SchTyp=1) OR (BenBas=1) THEN

The next few questions ask about the value of your scheme's assets. MinFund As you may know, a minimum funding requirement is a valuation to ensure that contributions will meet pension payments. Has the scheme had a Minimum Funding Requirement (MFR) valuation?


IF (MinFund=1) THEN MFRDate When was the last Minimum Funding Requirement valuation conducted? INTERVIEWER: If prior to 1997, code “9”

1. 1997 2. 1998 3. 1999 4. 2000 5. 2001 6. 2002 7. 2003 8. Don’t know exactly, but within last 6 years 9. Don’t know exactly but over 6 years ago 10. Don’t know

AsstVal At the last Minimum Funding Requirement valuation, what was the value of the scheme’s assets as a percentage of its liabilities? IF UNSURE GET ESTIMATE

DO NOT READ OUT 1 Less than 70 per cent 2 70 - 89 per cent 3 90 - 99 per cent 4 100- 119 per cent 5 120 per cent or more 6 Don’t know

IF (AsstVal=1 or AsstVal=2 or AsstVal=3) THEN Undchk

So can I just check, was the scheme found to be under 100 per cent of the minimum funding requirement at its last MFR valuation?

1 Yes 2 No 3 Don't know

UndAct Has any action been taken, or is any planned because of this underfunding? CODE UP TO 5 ANSWERS – SET CATI

1 No, no action taken nor planned (THIS MUST BE SINGLECODE) 2 Cash injection 3 Employer's contributions increased 4 Members' contributions increased 5 Other (Specify)


31

ASK ALL WHERE (SchTyp=1) OR (BenBas=1) Surchk Now moving away from the MFR, I'd like to ask you to think about the scheme's own on-going funding valuation. Can I just check, at its most recent valuation, was the scheme found to be in surplus? INTERVIEWER NOTE: This question is asking about a different type of valuation from the previous questions. It is possible for the scheme to be in surplus based on one type of valuation but not in surplus by another valuation.

1 Yes 2 No 3 Don't know IF (Surchk = 1) THEN SurpAct Has any action been taken because of this surplus? CODE UP TO 5 ANSWERS – SET CATI

1 No, no action (THIS MUST BE SINGLECODE) 2 Employer's contributions stopped 3 Employer's contributions reduced 4 Members' contributions stopped 5 Members' contributions reduced 6 Money withdrawn by organisation 7 Excess retained in fund 8 Benefits enhanced 9 Other (Specify)


32

ASK ON LOOPS 1 – 3 ONLY Divintro The next few questions I’d like to ask you are on pension rights and divorce. We would like to establish how many earmarking, attachment and pension sharing orders you have made in relation to divorce among scheme members SINCE December 2000.

Earatt For pension purposes, has the scheme received any earmarking orders from the courts since December 2000? READ OUT IF NECESSARY: Earmarking orders: when a court makes an order for a pension scheme member to pay part of their pension to their former spouse. The money belongs to the member until they retire and draw the pension at which time they will make payments direct to their former spouse from their pension payments. 1 Yes 2 No 3 Don’t know

IF (EarAtt=1) THEN:

AttNum How many earmarking orders has the scheme received from the courts since December 2000? INTERVIEWER: IF UNSURE, TRY TO GET BEST ESTIMATE. ENTER NUMBER……… Don’t know

ImpAtt For pension purposes, has the scheme been asked by the courts to implement an attachment order since December 2000? READ OUT IF NECESSARY: If the courts doubt the scheme member can be relied upon to make the payments, they can order the pension scheme to make payments direct to the former spouse from the member’s pension when it becomes payable. .


IF (ImpAtt=1) THEN:

AttNum How many Attachment orders has the scheme received since December 2000 [Data sheet Q.28]

INTERVIEWER: IF UNSURE, TRY TO GET BEST ESTIMATE. ENTER NUMBER……… Don’t know


33

Impshare Has the scheme received any pension sharing orders since December 2000? READ OUT IF NECESSARY: Pension sharing orders are different from earmarking and attachment orders because an amount of money is transferred out of the divorcing scheme member’s fund at the time of the divorce and used to buy a pension in the name of the former spouse which will be payable when he/she retires. 1 yes 2 No 3 Don’t know IF (Impshare = 1) THEN :

SHARENUM How many pension sharing orders has the scheme received since December 2000? INTERVIEWER: IF UNSURE, TRY TO GET BEST ESTIMATE. ENTER NUMBER……… Don’t know

ASK ALL ASK NEXT QUESTIONS ON EACH OF THE FIRST 3 LOOPS

ASK ALL PenAgm The next few questions concern the normal age at which a member can draw an unreduced pension. First, can I ask what is the normal pension age for men? By this I mean the age when a scheme member can draw his/her pension. READ OUT IF NECESSARY : This excludes cases of disability or ill health. By unreduced we mean that no penalty is incurred by early retirement [Data sheet Q. 25] PenAgw And what is the normal pension age for women? Again by this I mean the age when a scheme member can draw her UNREDUCED pension READ OUT IF NECESSARY : This excludes cases of disability or ill health. By UNREDUCED we mean that no penalty is incurred by early retirement. [Data sheet Q.26]


34

IF (PenAgM=PenAgw) THEN YreQal From what year have pension ages been equal? INTERVIEWER : Code pre-1901 as 1900. Code “always been equal” as 2001. (Range 1900 – 2003 FOR YEAR GIVEN) [Data sheet Q.19] IF (PenAgM=PenAgw) THEN

AgeFlexM1 You mentioned that the normal retirement age for men and women in your organisation is (age@ PenAgm). Does your organisation allow men and women to retire before this age on the grounds of ill health AND STILL DRAW THEIR UNREDUCED PENSION? READ OUT IF NECESSARY: By UNREDUCED we mean that no penalty is incurred by early retirement 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know AgeFlexM2 Apart from ill health, does your organisation allow men and women to retire before the age of (age@ PenAgm) for other reasons AND STILL DRAW THEIR UNREDUCED PENSION? READ OUT IF NECESSARY: By UNREDUCED we mean that no penalty is incurred by early retirement 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know AgeFlexM3 And does your organisation allow men and women to retire after the age of (age@ PenAgm)? 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know IF (AgeFlexM3 = 1) THEN: AgeFlexM4 If a man or a woman chooses to work beyond the age of (age@ PenAgm), does your organisation continue to contribute to his or her chosen pension plan? IF YES, check if this is at the same rate as before or at a lower rate. 1. Yes – at the same rate as before 2. Yes – but at a lower rate than before 3. Yes – at a higher rate than before 4. No 5. Don’t know


35

IF (PenAgM DOES NOT =PenAgw) THEN

AgeFlexM1 You mentioned that the normal retirement age for men in your organisation is (age@ PenAgm). Does your organisation allow men to retire before this age on the grounds of ill health AND STILL DRAW THEIR UNREDUCED PENSION? READ OUT IF NECESSARY: By UNREDUCED we mean that no penalty is incurred by early retirement 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know AgeFlexM2 Apart from ill health, does your organisation allow men to retire before the age of (age@ PenAgm) for other reasons AND STILL DRAW THEIR UNREDUCED PENSION? READ OUT IF NECESSARY: By UNREDUCED we mean that no penalty is incurred by early retirement 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know AgeFlexM3 And does your organisation allow men to retire after the age of (age@ PenAgm)? 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know IF (AgeFlexM3 = 1) THEN: AgeFlexM4 If a man chooses to work beyond the age of (age@ PenAgm), does your organisation continue to contribute to his chosen pension plan? IF YES, check if this is at the same rate as before at a lower rate or at a higher rate. 1. Yes – at the same rate as before 2. Yes – but at a lower rate than before 3. Yes – at a higher rate than before 4. No 5. Don’t know IF (PenAgM DOES NOT =PenAgw) THEN AgeFlexF1 You mentioned that the normal retirement age for women in your organisation is (age@ PenAgm). Does your organisation allow women to retire before this age on the grounds of ill health AND STILL DRAW THEIR UNREDUCED PENSION? READ OUT IF NECESSARY: By UNREDUCED we mean that no penalty is incurred by early retirement


36

1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know AgeFlexF2 Apart from ill health, does your organisation allow women to retire before the age of (age@ PenAgm) for other reasons AND STILL DRAW THEIR UNREDUCED PENSION? READ OUT IF NECESSARY: By UNREDUCED we mean that no penalty is incurred by early retirement 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know AgeFlexF3 And does your organisation allow women to retire after the age of (age@ PenAgm)? 1. Yes 2. No 3. Depends on circumstances (please specify) 4. Don’t know AgeFlexF4 If a woman chooses to work beyond the age of (age@ PenAgm), does your organisation continue to contribute to her chosen pension plan? IF YES, check if this is at the same rate as before or at a reduced rate. 1. Yes – at the same rate as before 2. Yes – but at a lower rate than before 3. Yes – at a higher rate than before 4. No 5. Don’t know ASK ALL IN OCCUPATIONAL LOOP AgeFlexM5 Thinking about MOST men who have retired from your organisation in the last five years, have they retired at age (age@ PenAgm), or before or after age (age@ PenAgm)? 1. Most men retire at (age@ PenAgm) 2. Most men retire before (age@ PenAgm) 3. Most men retire after (age@ PenAgm) 4. Varies too much to say 5. No men have retired in the last five years 6. Don’t know AgeFlexF5 Thinking about MOST women who have retired from your organisation in the last five years, have they retired at age (age@ PenAgm), or before or after age (age@ PenAgm)? 2. Most women retire at (age@ PenAgm) 3. Most women retire before (age@ PenAgm) 4. Most women retire after (age@ PenAgm) 5. Varies too much to say


37

6. No women have retired in the last five years Don’t know

THIS IS THE END OF THE FIRST LOOP FOR THE EXTENDED VERSION OF SECTION C. THEY WILL NEED TO GO THROUGH THIS LOOP AGAIN – UP TO MAX OF 3 TIMES IN TOTAL – DEPENDING ON THEIR RESPONSE AT (NumOccs)


38

SECTION E: OCCUPATIONAL SCHEMES 4 – 10 ASK THIS SECTION IF “NumOccs” >3. OTHERS GO TO FILTER AT START OF SECTION D Repeat this for scheme 4-10 - depending on response at “NumOccs” Ocname That’s all I need to know about the three largest occupational schemes your company has in place. You said that the organisation offers access to ($NUMOCCS) occupational pension schemes in total. I’d now like to ask you some questions about the other occupational schemes you have in place. What is the largest (/4th largest/5th largest/6th largest etc) scheme called? WRITE IN INTERVIEWER: “largest” in terms of the number of current scheme members (Text =100 characters) ASK ALL OcName What is the 4th largest/5th largest/etc scheme called? (Text=100 characters) OccYr When was the scheme established? IF UNSURE, GET ESTIMATE INTERVIEWER : Enter year. Code pre-1901 as 1900. (Range 1900 – 2000). NewMem Can I check, is the scheme currently open to new members?

1 Yes 2 No

IF (NewMem=2) THEN HowCld Is this scheme ... READ OUT ... SINGLECODE (READ OUT IF NECESSARY: By contributions, I mean contributions made by employee or employer) 1 "one into which any contributions are still being paid," 2 "one into which no contributions are paid at present, but might be in the future," 3 "or, a scheme into which no further contributions are being paid now or at any time in the

future?" SchMem Now concerning scheme membership. How many current employees, including senior managers and directors, are active members of the scheme? IF UNSURE, GET BEST ESTIMATE IF (SchMem <> 0) THEN MemFul Of these, how many are full-time employees? IF UNSURE, GET BEST ESTIMATE [Hidden derived variable: NumPrt (number of part-time employees) ]

IF (NewMem=1) THEN SchOpn Is the scheme open to all employees, or can only certain types of employee join? INTERVIEWER NOTE : Code in priority order, 1 is highest Single code only.

1 All employees in organisation, 2 Senior management only, 3 White collar /staff employees only, 4 Blue collar / works employees only,


39

5 All employees in a particular subsidiaries of the organisation, 6 Only those invited to join 7 All in particular business group/activity (e.g. employees in our insurance firms) 8 Hourly or weekly paid employees (not white collar staff) 9 All employees under a certain age 10 All employees over a certain age 11 All employees up to senior management level/all employees except for senior

managers or directors 12 Some other group of employees (Specify) ASK ALL TaxApp Is the scheme tax-approved? READ OUT IF NECESSARY: Schemes that are not tax-approved provide benefits for employees in excess of the tax limit for earnings. These schemes are also unlikely to have trustees (however, they may do so)

1 Yes 2 No

IF (TaxApp=1) THEN Truste Now regarding trustees or directors. How many trustees or directors does the scheme have?

IF (Truste IN [1..95]) THEN TruCur How many of these trustees or directors, if any, are active members of the scheme? That is current employees.

ASK ALL SERPS Is the scheme ... READ OUT ... SINGLECODE

1 "contracted out of SERPS (the State Earnings Related Pension Scheme), now known as second state pension," 2 "or, not contracted out? ('contracted in')" 3 (Part contracted-in, part contracted-out) – DO NOT READ OUT

SchTyp And is the scheme ... READ OUT ...

1 "a salary-related scheme" (Defined Benefit) 2 "a money-purchase scheme" (Defined contribution) 3 “or, a scheme where benefits are calculated using both methods?" 4 Other (Specify)

INTERVIEWER: Definitions in box on page 2 of datasheet. IF (NewMem=1 OR (NewMem=2 AND (HowCld=1 OR HowCld=2))) THEN ContRB Is the scheme ... READ OUT ... READ OUT IF NECESSARY: By contributory we mean that members pay contributions into the scheme, other than for additional voluntary contributions (AVC’s) or optional benefits.

1 "contributory, that is do its members pay contributions," 2 "or, is the scheme non-contributory?"

END OF LOOP – REPEAT LOOP AGAIN IF MENTIONED >4 AT (NumOccs)

Section D: Group Personal Pension Schemes – Schemes 1 - 3

40

Section F is asked for each Group Personal Pension arrangement. The main series of questions may be repeated up to 10 times: in greater detail for schemes 1-3. IF: “GPPPlans”= code 1 = gets asked this section once (extended version) IF: “GPPPlans” = code 2 = gets asked up to 10 times depending on exact response given at “NumPlans”. The first 3 schemes would get the extended version and the remaining schemes would get the “cut down” version SECTION F: GROUP PERSONAL PENSIONS – SCHEMES 1 - 3 IF (HasGPP=1) THEN READ OUT The next series of questions is about your organisation's group personal pension plans. Please do not include any Stakeholder pension plans or other personal pension plans in your answers. IF NOT LOOP 4 You said that the organisation provides (NUMPLAN) group personal pension plan(s). GPPPrv IF Numplans = 1 THEN: With which provider have you arranged the plan with? WRITE IN INTERVIEWER: (Text =100 characters) IF Numplans = >1 THEN: With which provider have you arranged the largest (/2nd largest/3rd largest) plan with? WRITE IN INTERVIEWER: “largest” in terms of the number of current scheme members (Text =100 characters) GPPYr In which year did the organisation first set up this Group Personal Pension? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : ENTER YEAR. IF BEFORE 1901 CODE 1900 (Range 1900 – 2003) GPPEmp How many employees participate in the Group Personal Pension Plan? IF UNSURE GET BEST ESTIMATE. TYPE IN NUMBER. RANGE = 0 - 999999 ADD IN CHECK SO THAT ANSWER IS <= Numempee1 or Numempee. GPPCon May I check, does this organisation contribute to the Group Personal Pension arrangement?

1 Yes 2 No

IF (GPPCon=1) THEN GPPNum For how many employees does this organisation contribute? IF UNSURE, GET BEST ESTIMATE INTERVIEWER NOTE : If organisation has 2 or more Group Personal Pension Plans, we want to know the number for this specific Group Personal Pension Plan. -1='All of them'

GPPSERP Of these, how many are contracted out of SERPS (or the second state pension), that is how many of these employees have Appropriate Personal Pension plans? IF UNSURE, GET BEST ESTIMATE TYPE IN EXACT NUMBER OR IF APPLICABLE -1=ALL OF THEM


41

GPPMin1 What is the minimum rate at which the organisation contributes to the Group Personal Pension plan? IF UNSURE , GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. IF CODE 1 OR 2 CHECK WHETHER THERE IS A MINIMUM OR MAXIMUM OR WHETHER THERE IS A FIXED PAYMENT. IF NO MIN / MAX, CODE EITHER 3 OR 4 DEPENDING ON WHETHER A % OR AN AMOUNT OF MONEY


GPPMin2 ENTER ANSWER.

IF (GPPMin1=2 or GPPMin1=4) THEN GPPMin3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE


IF (GPPMin1=1 OR GPPMin1=2) THEN GPPMax What is the maximum rate at which the organisation contributes to the Group Personal Pension Plan? INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY.


GPPMax2 ENTER ANSWER.

IF (GPPMax1=2) THEN

GPPMax3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE


GPPAve What is the average rate your organisation has contributed to the Group Personal Pension plan in the last 3 years (since the scheme was set up)? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY.



42

GPPAve2 ENTER ANSWER.

IF (GPPAve1=2) THEN GPPAve3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE


IF (GPPYr IN [1996..2000]) THEN GPPPre Prior to starting the group personal pension, did the organisation make any other form of pension provision for the employees concerned? 1 Yes 2 No

IF (GPPPre=1) THEN GPPClo Was this ... READ OUT ... SINGLECODE [Data sheet definitions in box on page 2]

1 "via an occupational scheme which still admits new members?" 2 “or, via a closed or frozen occupational scheme," 3 (No, neither of these) – DO NOT READ OUT

IF (GPPClo=2) THEN GPPCtyp Was this closed scheme ... READ OUT ... SINGLECODE [Data sheet definitions in box on page 2]

1 "a salary-related (defined benefit) scheme," 2 "or, a money purchase (defined contribution) scheme?" 3 A scheme where benefits were calculated using both methods

IF (GPPClo=1 or GPPClo =2) THEN GPPcov Did you include this (closed) scheme when you told me earlier in the interview that this organisation has $NUMOCCS occupational schemes? INTERVIEWER NOTE : Not including wound-up schemes.

1 Yes 2 No 7 Not applicable, wound-up scheme


43

This section is repeated for schemes 4-10, and is based on response given at “NumPlans” SECTION F: GROUP PERSONAL PENSIONS – SCHEMES 4-10 ASK THIS SECTION IF NumPlans>3 GPPPrv That’s all I need to know about the three largest group personal pension schemes your company has in place. You said that the organisation provides ($NUMplans) group personal pension schemes in total. I’d now like to ask you some questions about the other group personal pension schemes you have in place. With which provider have you arranged the (/4th largest/5th largest/6th largest) plan with? WRITE IN INTERVIEWER: “largest” in terms of the number of current scheme members (Text =100 characters) GPPPrv With which provider have you arranged the 4th largest/5th largest, etc Group Personal Pension Plan? (Text=100 characters) GPPYr In which year did the organisation first set up this Group Personal Pension? INTERVIEWER : ENTER YEAR. IF BEFORE 1901 CODE 1900. (Range 1900 – 2000) GPPEmp How many employees participate in the Group Personal Pension Plan? GPPCon May I check, does this organisation contribute to the Group Personal Pension arrangement?

1 Yes 2 No

IF (GPPCon=1) THEN GPPNum For how many employees does this organisation contribute? INTERVIEWER NOTE : We want to know the number for this specific Group Personal Pension Plan. WRITE IN EXACT NUMBER OR IF APPLICABLE 99996='All of them' GPPSERP Of these, how many are contracted out of SERPS, now known as second state pension ,that is how many of these employees have Appropriate Personal Pension plans? WRITE IN EXACT NUMBER OR IF APPLICABLE 9996='ALL OF THEM'

IF (GPPYr IN [1996..2000]) THEN

GPPPre Prior to starting the group personal pension, did the organisation make any other form of pension provision for the employees concerned?

1 Yes 2 No

IF (GPPPre=1) THEN GPPClo Was this ... READ OUT ... SINGLECODE Data sheet definitions in box on page 2

1 "via an occupational scheme which still admits new members?" 2 "or, via a closed or frozen occupational scheme,"


44

3 (No, neither of these) – DO NOT READ OUT

Section E: Personal Pension Arrangements

45

ASK THIS SECTION IF (HasAPP=1). This series of questions is repeated once only. SECTION G: PERSONAL PENSION ARRANGEMENTS IF (HasAPP=1) THEN READ OUT The next series of questions is about your organisation's contributions to any employee private personal pension arrangements. Please do not include group personal pensions or stakeholder plans. PPYr In which year did the organisation first start making contributions to employees‘ private personal pension plans? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : ENTER YEAR. IF BEFORE 1901 CODE 1900. (Range 1900 – 2003) PPCont For how many employees does this organisation contribute to private personal pension plans? IF UNSURE, GET BEST ESTIMATE [Data Sheet Q.5b] PPSERP Of these, how many are contracted out of SERPS, now known as second state pension, IF UNSURE, GET BEST ESTIMATE WRITE IN EXACT NUMBER OR IF APPLICABLE -1=ALL OF THEM

PPMin1 What is the minimum rate at which the organisation contributes to employees’ Private Personal Pension plan? IF UNSURE, GET BEST ESTIMATE. SINGLECODE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY, AN AMOUNT OF MONEY, OR A FIXED RATE. IF CODE 1 OR 2 CHECK WHETHER THERE IS A MINIMUM OR MAXIMUM OR WHETHER THERE IS A FIXED PAYMENT. IF NO MIN / MAX, CODE EITHER 3 OR 4 DEPENDING ON WHETHER A % OR AN AMOUNT OF MONEY.


PPMin2 ENTER ANSWER.

IF (PPMin1=2 or PPMin1=4) THEN PPMin3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE


IF (PPMin1=1 OR PPMin1=2) THEN PPMax What is the maximum rate at which the organisation contributes to employees’ Private Personal Pension Plan? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY.



46

PPMax2 ENTER ANSWER.

IF (PPMax1=2) THEN PPMax3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE


PPAve Since the scheme was set up/in the last 3 years, what is the average rate your organisation has contributed to employees’ Private Personal Pension plan? IF UNSURE, GET BEST ESTIMATE INTERVIEWER : FIRST CODE WHETHER YOU WILL RECORD A PROPORTION OF PAY OR AN AMOUNT OF MONEY.


PPAve2

ENTER ANSWER.

IF (PPAve1=2) THEN PPAve3 What period does this payment cover? SINGLECODE INTERVIEWER NOTE: WE ARE TRYING TO ESTABLISH HOW OFTEN THIS PAYMENT IS MADE


IF (PPYr IN [1996..2000]) THEN PPPre Prior to making contributions to personal pensions, did the organisation make any other form of pension provision for the employees concerned? 1 Yes 2 No

IF (PPPre=1) THEN PPClo Was this ... READ OUT ...SINGLECODE Data sheet definitions in box on page 2 1 "via an occupational scheme which still admits new members?" 2 "or, via a closed or frozen occupational scheme," 3 (No, neither of these) – DO NOT READ OUT

IF (PPClo=2) THEN PPCtyp Was this closed scheme ... READ OUT ... SINGLECODE Data sheet definitions in box on page 2 1 "a salary-related (defined benefit) scheme," 2 "or, a money purchase (defined contribution) scheme?"


47

3 A scheme where benefits were calculated using both methods

Section F: Recent and Planned Changes

48

Everybody gets asked this section BUT Non-providers (ChkProv = 1) do not go through the first part of this section – they come back at (Stakko). SECTION H: RECENT AND PLANNED CHANGES READ OUT This final series of questions is about recent and expected changes to your organisation's pension provision. IF (NumOccs>0 OR NumOccs = DK) THEN MPtoSR Can I just check, have any of your occupational pension schemes changed from a money purchase scheme to a salary related one


SRtoMP And can I check, have any of your occupational pension schemes changed from a salary related scheme to a money purchase one


COChng1 Have any of your occupational schemes changed from being contracted-out or part-contracted out to being contracted-in?


COChng2 And have any of your occupational schemes changed from being contracted-in to being contracted-out or part-contracted out?


IF (HasGPP=2) AND ((HasApp=1) OR (OccSchme=1) OR (Hasshp = 1)) THEN GPPChge To your knowledge, has this organisation ever seriously considered moving to a group personal pension arrangement?


IF (GPPChge=1) THEN GPPFive Do you think such a move will occur in the next five years?


IF (HasSHP = 2) AND ((HasGPP=1) OR (HasApp=1) OR (OccSchme=1)) THEN: SHPChge To your knowledge, has this organisation ever seriously considered moving to a Stakeholder pension arrangement?

1 Yes


49

2 No 3 Don’t know

IF (SHPChge=1) THEN GPPFive Do you think such a move will occur in the next five years?


IF (HasApp <> 1) AND ((HasGPP=1) OR (OccSchme=1)OR (Hasshp = 1)) THEN PPChge To your knowledge, has this organisation ever seriously considered contributing to employees' personal pension plans, to replace your current pension provision? That is APART from offering access to a stakeholder pension scheme.


IF (PPChge=1) THEN PPFive Do you think such a move will occur in the next five years?


IF (HasGPP=1) OR (HasApp=1) OR (OccSchme=1) OR (HasSHP = 1) OR (NoNewOcs = 1)THEN ExpChnge (And) are there any changes which the organisation has seriously considered making to it's pension provision in the next two years?


IF (ExpChnge=1) THEN ExpWhat What are these changes? PROBE FULLY. CODE UP TO FIVE ANSWERS – SET CATI.

1 Improve benefits (including death (in service) benefits, ill health benefits, increased employer contributions or funding level, etc.)

2 Introduce / change to defined contribution (money purchase) scheme 3 Introduce / change to group personal pension arrangement or personal pension plans 4 Introduce / change to stakeholder pension 5 Equalisation of pension ages 6 Close scheme(s) and set up new provision 7 Set up new scheme 8 Rationalise/merge schemes 9 Contract in to SERPs 10 Contract out of SERPs 11 Open up eligibility rules to allow more employees to join 12 Change existing schemes to avoid need for stakeholder pension 13 Other (SPECIFY)

Staknxt

IF (HasGPP=1) OR (HasApp=1) OR (OccSchme=1) AND (HASSHP = 2)THEN Stakko


50

Do you think that the introduction of stakeholder pensions has affected any of your company's existing pension provision?


IF (Stakko=1) Stakko1 In what ways has stakeholder pensions affect existing provision? WRITE IN TEXT = 120 CHARS

THANK RESPONDENT

END OF INTERVIEW

133Appendices – Technical report on sampling, fieldwork and weighting

Appendix ATechnical report on sampling,fieldwork and weighting

A.1 Introduction

In October 2002, The Department for Work and Pensions (DWP) commissioned BMRB Social Researchand the Centre for Research in Social Policy (CRSP) to undertake the Employers’ Pension ProvisionSurvey 2002 (EPP), the fifth in a series of biennial surveys dating back to 1994. The survey collectedquantitative information on the current nature and extent of non-state pension provision withinprivate-sector employing organisations in Great Britain in 2003.

The study had the following specific aims:

• To provide a snapshot picture of non-state pension provision made by private-sector employingorganisations in 2003.

• To provide an up-to-date picture of current provision made by such organisations for comparisonwith findings from previous EPP surveys.

• To provide an indication of the extent of non-provision amongst such organisations and thegroups of employees affected by this.

• To provide information on recent changes to the type and extent of provision made, includinginformation on significant changes in pension provision made by such organisations in the lastfew years.

• To provide information on changes in provision planned by such organisations for the immediatefuture and the reasons for these changes.

• To provide an indication of the impact the new stakeholder pensions (introduced after the 2002study) have had on pension provision within such organisations.

• To provide information to build on recommendations arising from the recent Pickering Reportand the Sandler Review.

134 Appendices – Technical report on sampling, fieldwork and weighting

A.2 Method

As with previous surveys in the series, the 2002 survey was conducted using Computer AssistedTelephone Interviewing (CATI), allowing for maximum opportunity to compare the results with thosefrom earlier surveys. The use of CATI for this type of survey had a number of advantages. Thetelephone research was easily controlled and supervised and allowed for a relatively short fieldworkperiod, a key consideration for this particular survey where time-sensitive information was collectedfrom organisations. Centralised interviewing permitted careful sample management and maximumcontrol of the interviewing at all stages, allowing both overall response and response amongst certaintypes of organisations to be monitored on a daily basis. This, therefore, ensured that a wide-range oforganisations participated in the survey, providing representative results. The interview was conductedelectronically with all questions and routeing programmed automatically, meaning interviewers werefree to concentrate on the respondent’s answers and data was recorded accurately, a primeconsideration for this particular survey where complex and detailed information was collected.Finally, telephone fieldwork encouraged participation whilst also allowing the respondent toparticipate at a time that suited them, an essential requirement of this survey where the respondents– busy professionals – needed some encouragement to take part and the flexibility of being able totake part at a time suited to them. Respondents were able to schedule appointment times for theinterviewer to call, ensuring the sample and the interviewer’s time was used most efficiently andrespondents were more committed to taking part. On some occasions these appointments werebroken due to the busy nature of the organisations surveyed. However, a simple electronic processallowed the interviewers to re-schedule an appointment and then move on to the next interview.

A.3 Fieldwork

The survey fieldwork was conducted between January and May 2003 and involved three main stages:

• Stage One: Contacting sampled organisations to identify the most appropriate person to interview,an essential stage to ensure the survey was conducted with the person who was most capable ofanswering the technical questions asked during the interview. This stage also checked that theorganisation was in the private sector and was still trading. This stage was conducted between14 January and 30 January 2003.

• Stage Two: Despatching advance letters and a paper ‘data sheet’ to the person identified atstage one.

• Stage Three: The main interview with the person identified at stage one. This stage was conductedbetween 24 February and 12 May 2003.

A.4 Advance letter, data sheet and website

As in previous years, an advance letter and a ‘data sheet’ (Appendix B) was sent to the personidentified at stage one of the fieldwork before they took part in the main interview at stage three. Theletter was despatched on DWP headed notepaper to legitimise the study and therefore encourageresponse. Organisations in Wales were offered a translation of the letter in the Welsh language but norequests for this were received.

To reduce any confusion that might arise during the interview, the datasheet provided a descriptionof the main types of pension schemes the organisations might provide. The datasheet also containedsome of the key questions from the survey and was designed to encourage respondents to refer to


documents or their pension specialists in advance of the main interview so they could gather the morecomplex and detailed information required. Respondents were asked to record details on the datasheet, such as the types of pension schemes their organisation provided, the number of employeeswithin each scheme and some detailed questions on the nature of any occupational schemes they hadin place. To assist them with their answers, respondents were asked to keep the data sheet with themduring the main interview.

To help encourage response, a website was created for respondents to access: http://www.surveyofpensions.org. The website was mentioned in the advance letter and respondents wereencourage to access the site if they wanted more detailed information on the survey. The website alsocontained some extracts from previous reports so respondents could understand the nature of thesurvey and how the results would be used. Respondents were also able to download a copy of theletter and the datasheet and contact BMRB via the website if they had any further queries.

A.5 Questionnaire

The questionnaire (Appendix B) consisted of eight main sections:

Section A: About the organisation

This section collected a range of information about the organisation, including the type oforganisation and its workforce composition.

Section B: Selection of schemes

This section collected information on the types of pension schemes and arrangements the organisationhad in place and also included some questions for non-providers.

Section C: stakeholder pension schemes

This section collected detailed information on any Stakeholder schemes the organisation had in place,including details on contributions.

Section D: Employer contributions to private stakeholder pensions

This section collected information on contributions the organisation made to employees’ stakeholderpensions arranged privately.

Section E: Occupational schemes

This section collected information on the type, size and valuation of occupational pension schemes,information on contributions and information on trustees and other topical issues such as pensionsharing on divorce.

Section F: Group Personal Pensions

This section collected information on Group Personal Pension arrangements, including contributions.

Section G: Personal pension arrangements

This section collected information on arrangements employers made for contributing to personalpensions (covering only personal pensions to which the employer makes contributions).


Section H: Recent and planned changes

This section collected information about any changes to pension provision the organisation hadrecently made or any changes planned for the future. This section also explored the impactstakeholder pensions had had on pension provision.

The survey was conducted using CATI software as part of the Quantum package. The same version ofthe questionnaire was used for all organisations with the relevant routeing built into the CATI script.Section C was repeated for each stakeholder pension scheme the organisation had in place, up to amaximum of four times. Sections E and F were repeated for each occupational or Group PersonalPension scheme the organisation had in place. To limit the burden on respondents, only the threelargest schemes, based on the number of active members, were asked about in full detail. Whereorganisations had more than three schemes, they were asked a reduced subset of questions for theremaining schemes up to a maximum of ten times. This subset of questions included key questions toallow classification of the type of provision and the extent of provision made across the workforce.Where organisations had a number of pension schemes in place or a particularly complicated set ofarrangements, filtering the questionnaire in this way and asking a reduced set of questions for someprovision ensured the burden on respondents was kept to a minimum.

A.6 Piloting

A detailed cognitive piloting exercise took place in early December 2002 to test the questionnaire andthe data sheet. This was conducted with a cross-section of private-sector employing organisations.The person responsible for pensions within each contacted organisation was interviewed face to faceto explore the questionnaire and the data sheet in detail. Following this exercise, the advance letter,data sheet, contact process and CATI questionnaire were all piloted in mid-January 2003. Interviewerswere briefed face to face by researchers from BMRB and detailed interviewer instructions were alsoissued. BMRB researchers also monitored the telephone interviews as they took place to understandhow the questionnaire was working in practice. Fifty-four organisations were interviewed during thepilot, covering a range of size bands and sectors. These were then excluded from the main stagesample. The pilot exercise was split into two phases to allow for changes to be made to thequestionnaire between phases.

A.7 Sample design

The survey is intended to provide estimates of pension provision, which were representative ofprivate-sector employers in Great Britain in 2003. For the 2003 survey, as for the 2000 survey, thesample was obtained from the Inter Departmental Business Register (IDBR). The IDBR is a Governmentdatabase maintained by the Office for National Statistics (ONS), which is based on VAT and PAYErecords. It was preferred over alternative sampling frames due to its greater coverage, particularly ofsmaller companies, and the amount of detail that could be obtained from the frame such as numberof employees, legal status, and SIC92 code. The main drawback with the IDBR for this particularsurvey was that only a small proportion of records had telephone numbers. Therefore, telephonenumbers had to be obtained after the sample was drawn through a tracing exercise.

The population for the survey was defined as all private-sector employers in Great Britain includingprivate companies, sole proprietorships, partnerships, and non-profit making organisations. Allpublic-sector employers such as Central Government, local government and other public bodies suchas health authorities and universities were excluded from the survey. Since the survey was only


concerned with pension provision for employees, extremely small businesses that consisted only ofowner-proprietors or owning partners (i.e. with no employees) were also excluded from the survey.

As in previous years, the sample design placed a great emphasis on large organisations. Although suchorganisations are relatively few in number, they account for a large proportion of the total labourforce and so are important in terms of providing estimates for pension provision among private-sectoremployees. In order to achieve a degree of over sampling among larger organisations the IDBR wasfirst stratified by size band. Within each size band the file was further stratified by number ofemployees, SIC92 division, legal status and alphabetically by postcode.

The total population counts taken from the IDBR in December 2002 by size band. In order to achievethe required initial sample in each size band a different sampling fraction was applied to each band.

Table A.1 shows how the initial sample of 9,792 was broken down by size band both pre- and post-tracing for telephone numbers.

Telephone numbers were obtained for 82 per cent of the original sample. This was slightly higher thanhad been anticipated and was achieved through using a variety of methods and sources. Theseincluded both electronic tracing and, where this failed to generate a number, manual tracing ofnumbers. Additionally, where a telephone number already existed from the IDBR this was used if thetracing process failed to generate a number. Finally, once the tracing process was exhausted,researchers working on the survey re-examined the small number of large companies (1000+) wherea number had not already been obtained and tried to obtain a contact number through companywebsites.

Overall, there seemed to be no biases in the tracing process. Although the success rate in obtainingnumbers for small employers was lower than for larger employers, this had been anticipated inadvance and had been taken into account when specifying the initial sample sizes by size band.

Table A.1 Pre- and post-trace sample by size band

Initial sample from IDBR Final sample after telephone matching

Size band Number of units % Number of units %

1-4 1400 14.3 650 8.1

5 600 6.1 377 4.7

6-12 800 8.2 606 7.6

13-19 800 8.2 687 8.6

20-49 1000 10.2 895 11.1

50-99 900 9.2 822 10.2

100-249 900 9.2 850 10.6

250-499 900 9.2 830 10.3

500-999 900 9.2 836 10.4

1000-4999 1000 10.2 928 11.6

5000-9999 347 3.5 319 4.0

10000-14999 111 1.1 105 1.3

15000-24999 58 0.6 52 0.6

Over 25000 76 0.8 69 0.9

Total 9792 100.0 8026 100


After tracing, a number of records were excluded from the sample. As in the 2000 survey, there werea number of SIC92 categories where it was felt the majority of employees would be covered by apublic-sector pension scheme. These were mainly in the education sector. Thus, all organisations withSIC codes 80100, 80210, 80220, 80301, 80302, or 80303 were excluded from the sample at thisstage. This represented a total of 330 organisations.

Additionally, a comprehensive check for duplicate records was done. This was initially based on fullpostcode and telephone number. Where duplicate postcodes or duplicate telephone numbers wereidentified, all the records were manually checked. Where it was established that duplicate records didexist in the sample, they were removed.

Once the process of eliminating ineligible and duplicate records was completed a final sample for theinitial screening stage was drawn. This was done by applying a selection probability specific to eachsize band so that the profile of the screening sample by size band matched the profile of the initialsample shown in Table A.2.

At the initial screening stage a number of businesses were identified as being out of scope eitherbecause they had gone out of business, they were a public-sector organisation, they had noemployees, or the telephone number was unobtainable or incorrect. Of the remaining records inscope, contact names were obtained and contact details confirmed for 91 per cent of the sample. Ofthe small number of non-responders at this stage, four per cent were due to non-contact in thefieldwork period and five per cent refused to give any details.

The result of the initial screening process was a sample of 3,238 employers who were mailed a letterand a data sheet. Table A.2 shows the distribution of the sample of employers who were mailed aletter and data sheet by size band.

Table A.2 Screened sample by size band

Size band Screened sample

(no. of employees) Number of employers % of employers contacted

1-4 252 7.8

5 146 4.5

6-12 262 8.1

13-19 266 8.2

20-49 373 11.5

50-99 342 10.6

100-249 345 10.7

250-499 328 10.1

500-999 340 10.5

1000-4999 375 11.6

5000-9999 119 3.7

10000-14999 40 1.2

15000-24999 19 .6

Over 25000 31 1.0

Total 3238 100.0


A.8 Response rate

After the initial letter was sent out to employers a total of 25 organisations contacted either DWP orBMRB to opt out of the survey before the start of the main stage fieldwork. These respondents wereremoved from the sample and the remainder of this section focuses on the 3,213 cases (the ‘issuedsample’) remaining in the sample at the start of the main telephone interviewing stage.

Table A.3 shows that from the initial issued sample of 3,213 a total of 206 cases (6.4 per cent) wereestablished as being out of scope for various reasons. From the remaining sample a total of 2,002interviews were achieved, representing a response rate of 67 per cent. The main reasons for non-response were refusal (19 per cent), general call backs that never resulted in an interview (six per cent),and abandoned or incomplete interviews (five per cent). In fact, there were 154 partial interviews thatwere abandoned or stopped at the request of the respondent. These ‘partial’ interviews have notbeen included in any of the analysis.

Table A.3 Response rate for main stage sample

N %

Total Issued sample 3,213 100

Out of scope

Number incorrect/unobtainable 22 0.7

Fax/computer line 6 0.2

Duplicate record 30 0.9

Ineligible company1 62 1.9

No reply after at least 10 calls 45 1.4

No answer/answering machine 41 1.3

Total out of scope 206 6.4

Total Eligible sample 3,007 100

Unproductive outcomes

Abandoned/incomplete interviews 154 5.1

Refused 582 19.3

Away during fieldwork period 82 2.7

Broken appointment 8 0.3

General call back 179 5.6

Total unproductive 1,005 33.4

Total complete interviews 2,002 66.6

1 Reasons for ineligibility included companies with no employees, companies that had closed down or moved, and

companies that categorised themselves as being in the public sector.

Table A.4 shows response rate broken down by size band. This shows that there were few obviousbiases. Among smaller companies the main reasons for companies being ineligible were primarilybecause it was established they had no employees, the company had gone out of business, or thetelephone number proved to be incorrect or unobtainable. For larger companies the reasons for beingout of scope were more likely to be because they were established as a public sector organisation orbecause duplicate records were uncovered during the interview process. The overall response rateamong the census companies (i.e. those with over 5000 employees) was exactly the same as theoverall response, namely 67 per cent.


Table A.4 Main stage response rates by size band

Issued Out of Total in Total non- Achieved Response

sample scope scope effective interviews1 rate

Size band n n % n n n %

1-4 251 31 12 220 86 134 61

5 145 7 5 138 46 92 67

6-12 258 19 7 239 90 149 62

13-19 265 14 5 251 71 180 72

20-49 370 21 6 349 126 223 64

50-99 340 13 4 327 115 212 65

100-249 344 21 6 323 116 207 64

250-499 324 16 5 308 96 212 69

500-999 336 21 6 315 111 204 65

1000-4999 371 26 7 345 84 261 76

5000-9999 119 9 8 110 36 74 67

10000-14999 40 2 5 38 14 24 63

15000-24999 19 3 16 16 8 8 50

Over 25000 31 3 10 28 6 22 79

Total 3213 206 6 3007 1005 2002 67

1 It should be noted that the response analysis has been done on the basis of the number of employees as taken from

the IDBR. Since the analysis in the rest of the report uses the number of employees given in the interview the number

of interviews achieved in each size band will not match the tables in the main part of the report.

A.9 Data preparation and data output

The CATI questionnaire incorporated a number of checks to try and resolve any discrepancies duringthe interview. For this reason post-interview edits were kept to a minimum.

All verbatim answers at ‘other – specify’ and open-ended questions were inspected by coders. Thisresulted in some additional codes being added to the code frames of some questions. In all questions,the aim was to reduce the proportion of answers left in ‘other’ to below ten per cent.

Four separate SPSS files were created. The main file was at the level of the company or organisationand consisted of 2,002 records. Additionally, three hierarchical SPSS files were created foroccupational pension schemes, GPP schemes, and stakeholder pension schemes. In these files, eachrecord represented a particular pension scheme, rather than a company or organisation.

A.10 Weighting

The aim of weighting is to compensate for differences in the probability of selection of eachorganisation and to ensure that the survey estimates are representative of the population as a whole.

The weights were derived in two stages. First, a design weight was applied to compensate fordifferences in the probability of selection within different size bands. This weight applied was simplythe inverse of the selection fraction shown in Table A.1 above. Second, once these differences in theprobability of selection had been compensated for, the achieved sample was weighted to the IDBRpopulation by means of a cell weighting procedure.

141

The matrices that were used to derive the cell weights were based on the known distribution of theIDBR population by size of organisation and SIC92 division, for each of private companies, soleproprietors and partnerships. In deriving the cell weights, where cells were empty or contained veryfew cases, adjacent cells were merged.

Once the cell weights had been derived the final organisational weight (w_org) was computed simplyby multiplying the design weight by the cell weight. The weights were then re-scaled to ensure thatthe weighted sample size was the same as the unweighted sample size (n=2002).

The weight for employees (w_emp) was derived by multiplying the organisational weight by thenumber of employees. This weight was also re-scaled to ensure that the weighted sample size was thesame as the unweighted sample size (n=2002).

Finally, both scaled weights were multiplied by 100. The default output in SPSS shows percentagesand absolute numbers rounded to the nearest whole number. Given the range of weights on the datafile, this can have the effect of showing empty cells in SPSS output, when there are actually data in thecells. Multiplying the scaled weights by 100 is simply a means to remedy this problem.

Appendices – Technical report on sampling, fieldwork and weighting

143

Appendix BRe-run of tables from mainreport excluding smallercompanies or outlying cases

Table B.1 SERPS status of occupational schemes by type of scheme1

Column percentages




Is the scheme: related purchase Other related purchase Other All

Contracted out of SERPS? 75 13 69 52 8 2 30

Not contracted out? 25 84 13 22 89 87 63

Part contracted in, part

contracted out? 0 0 3 * 3 * 1

Do not know 0 3 16 25 * 11 6

Weighted base 24 47 15 15 48 6 162

Unweighted base 361 285 161 344 102 24 1277


Notes: 1 Statistics after removing case(s) with high weight.


Appendices – Re-run of tables from main report excluding smaller companies or outlying cases

144

Table B.2 Membership profile of occupational schemes by type ofscheme1

Column percentages




Membership profile related purchase Other related purchase Other All

Average percentage of

total members that are:

Active members 77 78 77 66 89 [52] 82

Deferred pensioners 13 20 15 22 5 [33] 12

Current pensioners 9 1 8 12 6 [11] 7

Average percentage of

active members that are:

Full-time employees 68 95 62 90 99 [97] 88

Part-time employees 32 5 38 10 1 [3] 12

Men 56 75 43 74 50 [96] 61

Women 44 25 57 26 50 [4] 39

Weighted base 34 25 13 12 41 5 139

Unweighted base 334 264 96 307 95 19 1115

1 Statistics after removing case(s) with high weight.


occupational schemes per organisation and is therefore missing for 15 schemes overall. Figures in [ ] are average

percentages based on unweighted data.

Table B.3 Normal pension ages of occupational schemes by type ofscheme1

Column percentages





Men

50-55 2 * 0 0 6 [1] 2

56-59 * 0 0 0 0 [0] *

60 55 34 73 24 22 [6] 37

61-64 1 1 1 9 * [0] 2

65 42 65 26 67 72 [12] 59

Women

50-55 3 * 0 * 6 [1] 3

56-59 * 0 0 0 0 0 *

60 76 53 87 45 80 [8] 71

61-64 1 2 1 11 8 [0] 4

65 19 45 12 44 7 [10] 22

Continued


145

Table B.3 Continued

Column percentages






pension ages for men and

women 74 85 86 68 36 [17] 63

Weighted base 34 25 13 12 41 5 130

Unweighted base 334 264 96 307 95 19 1115


occupational schemes per organisation and is therefore missing for 15 schemes overall.




Table B.4 Normal pension ages of occupational schemes by size ofscheme1

Column percentages


100- 250- 500- 1000-

Normal pension age 1-19 20-49 50-99 249 499 999 4999 5000+

Men

50-55 3 * 0 2 1 0 0 0

56-59 0 0 1 0 0 0 0 0

60 32 43 13 18 11 19 12 41

61-64 1 1 5 5 6 12 14 4

65 64 57 81 75 82 69 74 56

66-69 0 0 0 0 0 0 0 0

Women

50-55 4 * * 3 1 0 0 0

56-59 0 0 1 0 0 0 0 0

60 78 53 24 19 12 19 12 41

61-64 5 1 4 5 6 12 14 4

65 13 46 70 74 81 69 74 56

66-69 0 0 0 0 0 0 0 0


pension ages for men

and women 48 90 89 98 100 99 100 100

Weighted base 101 14 5 4 2 1 2 1

Unweighted base 265 113 99 161 158 130 189 62






146

Table B.5 Trustee arrangements for occupational schemes by type ofscheme1

Column percentages


Open schemes


Trustee arrangements related purchase Other schemes All

Board of individual trustees 62 54 71 42 53

Sole corporate trustee 16 40 16 23 24

No trustees or directors/don’t know which 22 6 13 36 23



Number of trustees (excl. zeros and ‘don’t

know’ responses)

1 6 21 2 41 22

2 2 41 86 27 32

3 – 4 67 24 3 21 31

5 – 6 14 12 5 8 10

7 + 10 2 4 4 5



1 Statistics after removing case(s) with high weight.



147References

ReferencesSmith, A. and McKay, S. (2001) Employers’ Pension Provision 2000. Department for Work andPensions Research Report No. 163. Corporate Document Services: Leeds.

149Other research reports available

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28. Contributions Agency Customer Satisfaction Survey 1993 0 11 762220 6 £20.00

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152

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154

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130. Pensions 2000 (Attitudes to retirement planning) 1 84123 295 5 £33.00

131. Earnings Top-up Evaluation: Effects on Unemployed People 1 84123 289 0 £38.00

132. Earnings Top-up Evaluation: Employers’ Reactions 1 84123 290 4 £29.50

133. Earnings Top-up Evaluation: Qualitative Evidence 1 84123 291 2 £30.00

134. Earnings Top-up Evaluation: Effects on Low Paid Workers 1 84123 292 0 £37.00

135. Earnings Top-up Evaluation: The Synthesis Report 1 84123 293 9 £27.50

136. Modernising Service Delivery: The Better Governmentfor Older People Prototypes 1 84123 300 5 £28.00

137. The Verification Framework: Early Experiences ofImplementation 1 84123 303 X £27.00

138. Low-income families in Britain: Work, welfare and socialsecurity in 1999 1 84123 312 9 £53.00

139. Recruiting benefit claimants: A survey of employers inONE pilot areas 1 84123 349 8 £26.50

140. Moving towards work: The short term impact of ONE 1 84123 352 8 £27.50

141. Incapacity Benefits and Work Incentives 1 84123 350 1 £28.00

142. Cross-country comparisons of pensioners’ incomes 1 84123 351 X £33.00

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145. ‘Well enough to work?’ 1 84123 360 9 £31.00

146. Payments of pensions and benefits: A survey of socialsecurity recipients paid by order book or girocheque 1 84123 370 6 £34.50

147. Evaluation of the Minimum Income Guarantee Claim Line 1 84123 381 6 £27.50

148. The role of GPs in sickness certification 1 84123 389 7 £28.50

149. The medium-term effects of voluntary participation in ONE 1 84123 393 5 £34.50

150. Recruiting Benefit Claimants: A qualitative study ofemployers who recruited benefit claimants 1 84123 394 3 £25.00

151. Moving between sickness and work 1 84123 397 8 £37.00

152. National Survey of Child Support Agency Clients 1 84123 398 6 £39.00

153. Families, poverty, work and care 1 84123 406 0 £38.50


155

154. ONE year on: clients’ medium-term experiences of ONE 1 84123 407 9 £28.00

155. Barriers to employment for offenders and ex-offenders 1 84123 415 X £53.00

156. Short term effects of compulsory participation in ONE 1 84123 416 8 £46.50

157. The Dynamics of Poverty in Britain 1 84123 417 6 £32.00

158. Outcomes for children of poverty 1 84123 418 4 £33.00

159. Self-Funded Admissions to Care Homes 1 84123 420 6 £35.00

160. New Deal for Disabled People: National Survey ofincapacity benefits claimants 1 84123 421 4 £33.50

161. Low/moderate-income families in Britain: Work, WorkingFamilies’ Tax Credit and childcare in 2000 1 84123 426 5 £31.00

162. Evaluation of the Capability Report: Identifying thework-related capabilities of incapacity benefits claimants 1 84123 437 0 £29.00

163. Employers’ Pension Provision 2000 1 84123 419 2 £36.50

164. Low/moderate-income families in Britain: Changes inLiving Standards 1999-2000 1 84123 438 9 £32.50

165. Low- and moderate-income families in Britain: Changesin 1999 and 2000 1 84123 452 4 £35.00

166. Delivering a work-focused service: Final findings fromONE case studies and staff research 1 84123 450 8 £35.00

167. Delivering a work-focused service: Views and experiencesof clients 1 84123 451 6 £30.50

168. Findings from the Macro evaluation of the New Deal forYoung People 1 84123 464 8 £26.50

169. Costs and benefits to service providers of makingreasonable adjustments under Part III of the DisabilityDiscrimination Act 1 84123 476 1 £42.00

170. From job seekers to job keepers: Job retention, advancementand the role of in-work support programmes 1 84123 477 X £41.00

171. Qualitative research with clients: Longer term experiencesof a work-focused service 1 84123 478 8 £30.00

172. Social Fund use amongst older people 1 84123 485 0 £29.50

173. ‘Disabled for life?’ attitudes towards, and experiences of, 1 84123 493 1 £46.00disability in Britain

174. A comparison of Child Benefit packages in 22 countries 1 84123 506 7 £54.00

175. Easing the transition to work 1 84123 507 5 £34.00

176. Electronic government at DWP: Attitudes to electronicmethods of conducting benefit business 1 84123 508 3 £32.50


156

177. Self-employment as a route off benefit 1 84123 509 1 £31.50

178. The wider benefits of education and training:a comparative longitudinal study 1 84123 517 2 £30.00

179. Refugees’ opportunities and barriers inemployment and training 1 84123 518 0 £34.50

180. Family change 1999 to 2001 1 84123 530 X £39.00

181. Working Families’ Tax Credit in 2001 1 84123 531 8 £27.50

182. Working after State Pension Age 1 84123 532 6 £27.50

183. The final effects of ONE 1 84123 540 7 £50.00

184. Business start-up support for young people deliveredby The Prince’s Trust: a comparative study oflabour market outcomes 1 84123 550 4 £39.50

185. Employer engagement and the London labour market 1 84123 551 2 £34.00

186. Easing the transition into work (part 2 – client survey) 1 84123 560 1 £37.00

187. Experiences of lone parents from minorityethnic communities 1 84123 569 5 £25.00

188. Diversity in disability 1 84123 570 9 £34.00

189. Medical evidence and Incapacity Benefit:Evaluation of a pilot study 1 84123 594 6 £35.00

190. Families and children 2001: Living standards andthe children 1 84123 595 4 £41.00

191. Families and children 2001: Work and childcare 1 84123 596 2 £43.00

192. Low-income families and household spending 1 84123 597 0 £33.00

193. Pensions 2002: Public attitudes to pensions andsaving for retirement 1 84123 599 7 £40.00

194. Savings and life events 1 84123 610 1 £31.50

195. The Myners Principles & occupational pension schemesVolume 1 of 2 1 84123 619 5 £33.00

196. Profiling benefit claimants in Britain 1 84123 620 9 £34.00

197. Entitled but not claiming? Pensioners, the MinimumIncome Guarantee and the Pension Credit 1 84123 616 0 £36.00

198. Evaluation of the community sentences andwithdrawal of benefits pilots 1 84123 621 7 £30.00

199. Pension scheme changes and retirement policies:An employer and employee perspective 1 84123 625 X £28.00


157

200. Factors affecting the labour market participationof older workers 1 84123 626 8 £38.00

201. Delivering benefits and services for black andminority ethnic older people 1 84123 636 5 £31.00

202. Disability in the workplace: Employers’ and serviceproviders’ responses to the Disability DiscriminationAct in 2003 and preparation for 2004 changes 1 84123 642 X £48.00

203. Working lives: The role of day centres insupporting people with learning disabilitiesinto employments 1 84123 643 8 £38.50

204. Making the transition: Addressing barriers inservices for disabled people 1 84123 651 9 £44.00

205. The Pension Service Customer Survey 2003 1 84123 654 3 £41.50

206. Families and children in BritainFindings from the 2002 Families and Children Study (FACS) 1 84123 655 1 £60.00

Social Security Research Yearbook 1990–91 0 11 761747 4 £8.00











Further information regarding the content of the above may be obtained from:

Department for Work and PensionsAttn. Paul NoakesSocial Research DivisionInformation and Analysis Directorate4-26 Adelphi1–11 John Adam StreetLondon WC2N 6HT


employers' pension provision survey 2003

Documents