ONS reveals latest trends in private pension wealth

On 5 December the Office for National Statistics published its latest edition of Pension wealth in Great Britain, covering private pension wealth for the period April 2016 to March 2018.

The statistics, taken from the sixth round of the Wealth and Assets Survey, include the following findings:

• Total private pension wealth in Great Britain was £6.1 trillion in April 2016 to March 2018 (42% of total wealth) – up from £3.6 trillion (34% of total wealth) in July 2006 to June 2008, after adjusting for inflation
• In April 2016 to March 2018, 48% of all private pension wealth was held by pensioners, 37% by active members and 15% by deferred pensioners – and these proportions have been stable over time
• The percentage of adults below State Pension Age contributing to a private pension has increased, from 43% in July 2010 to June 2012, to 53% in April 2016 to March 2018 – this rise reflects increased participation in DC schemes, likely to be a result of auto-enrolment between 2012 and 2018
• For all individuals with an active occupational DC scheme the median wealth held in them decreased in each of the last three survey periods, from £11,600 (July 2010 to June 2012) to £3,300 (April 2016 to March 2018) – also likely a consequence of auto-enrolment bringing in new members
• For those aged 65 years and over, median pension wealth for pensions in payment for men is double that for women

Comment

What is also quite revealing is the continued dominance of DB provision when it comes to the stock of pensions wealth.  Despite the wholesale retreat from making such pensions available in the private sector, 80% of private pension wealth held by active members and more than 60% held by deferred members is in this form of provision.

That active DB pension wealth has increased by around 50% since July 2010 to June 2012 probably says more about how much more expensive it has become to provide £1 of pension per year than the total level of DB pensions active members have accrued.

How far should DB trustees go to assist members in making retirement and transfer decisions?

This difficult question forms the basis of an interesting discussion paper published by Royal London and Eversheds Sutherland on 4 December.

The paper starts with a ‘roadmap’ that sets out ever-increasing levels of engagement by employers and trustees, from the minimal ‘signposting’ involvement required under DWP legislation, to appointing financial advisers for members to use if they wish and finally to ensuring that these appointed advisers are subject to ongoing monitoring from an independent third party.

There is a case study of the initiative undertaken by Tesco, consideration of the pros and cons and a list of questions which trustees should ask of advice firms seeking to be appointed.

Comment

This is a difficult area and this report makes clear that simply doing the minimum required by legislation is not a risk-free option.

LCP has assisted a number of schemes appoint financial advisers and we have recently formalised our IFA governance provider service to monitor appointed IFAs.