UK - The overall number of active members in occupational pension schemes has fallen by 400,000 over the last year to 8.8 million, according to the Office of National Statistics (ONS).

Latest figures from the Occupational Pension Schemes Survey 2007 revealed that the total membership of occupational schemes - excluding group personal pensions (GPPs) and stakeholders - increased slightly from 26.5 million in 2006 to 26.7 million in 2007.

However the number of active participants in private sector schemes dropped by 400,000 to 3.6 million, although membership of public sector schemes increased slightly to 5.2 million.

The ONS survey of 1300 private and 200 public sector schemes showed the total number of occupational schemes has fallen by 5,391 to 54,114, while the number of open schemes dropped by 3,917 to 28,812.

Figures revealed the number of active members in private sector defined benefit (DB) schemes fell from three million to 2.7 million, while membership of defined contribution (DC) schemes also slipped from one million to 900,000.  

The ONS claimed around 75% of active members in private sector schemes in 2007 belonged to DB schemes or sections of schemes, however Watson Wyatt warned the figures demonstrate that DB membership has fallen below the "long-term floor" predicted by the Pensions Commission in 2004.

The consulting firm pointed out that in its first report the Pensions Commission - led by Adair Turner - predicted a level of 1.6-1.8 million active DB members going forward, however Watson Wyatt revealed the ONS figures already showed the number of active members in open private sector DB schemes - which indicates long-term membership level - has fallen from 1.4 million in 2006 to 1.3 million in 2007.

John Ball, head of UK DB consulting at Watson Wyatt, said: "In 2004, the Pensions Commission thought the decline in DB provision might never get this bad. In fact, it has already got worse. These figures are already a year out of date and more employers have closed their schemes in that time."

The ONS statistics also showed the number of active private sector members in a contracted-out scheme fell from 3.1 million to 2.7 million in 2007, which is equivalent to 75% of members.

Meanwhile the figures showed total contribution rates for both open and closed DB schemes in the private sector increased from 19.7% to 20.5%, with employer contributions increasing to 15% on average for open schemes and 16.1% for closed schemes. 

Employees also saw contributions rise from 4.9% to 5.5% for open DB schemes, although payments fell from 4.5% to 4.3% for members of closed pension funds.

Total contributions to DC schemes also increased from 8.9% to 9% for open schemes and 7.8% to 10.2% for closed schemes, with employers seeing the largest rise in contributions from 5.9% to 6.4% for open schemes and from 5.4% to 7% for closed schemes.

Despite the latest statistics, Ball claimed that DB pensions "have not died out completely" although he warned that the "companies sticking with them are increasingly few and far between".

"Most have decided that the costs are simply too big and too unpredictable. Employers have far more former employees than current employees in their DB schemes. As the link between the pension scheme and the company's current operations grows weaker, company directors are increasingly focussed on settling the pension liabilities that their predecessors took on," he added.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com