Latest ONS data shows 2018 as the first year employees pay more into Defined Contribution (DC) than Defined Benefit (DB) Schemes
The latest data from ONS shows that for the first time, employee contributions into DC pension schemes have overtaken those into DB schemes. 5 years ago in 2013, employees were paying £3.6bn into DB pensions and less than £0.5bn into DC. In 2017, employee DB contributions were £3.369bn compared to £1.387bn into DC. In 2018, employee contributions into DB pensions fell slightly to £3.216bn while employee contributions to DC had rocketed to £4.073bn, overtaking DB for the first time.
While employees are now paying more into DC than DB, employers continue to be paying more into DB. Even ignoring any special contributions to address funding shortfalls, employers are paying £17.621bn into DB. This compares to £11.621bn into DC into 2018, although this is more than double the £5.34bn paid by employers into DC in 2017.
The figures cover ‘self-administered schemes’ which include master trusts but not GPPs offered by insurance companies, so underestimate the total being paid into DC schemes.
Steven Cameron, Pensions Director at Aegon comments: “The latest figures from ONS show the meteoric rise in DC pensions, fuelled by automatic enrolment and the huge growth in master trusts. In 2018 for the first time, employee contributions to DC outstripped those into DB pensions. Employers are still paying more into DB than into DC, although with the continued decline in DB in the private sector and with auto enrolment minimum contributions from employers rising from 2% to 3% from April 2019, we may in 2020 see DC overtake DB for employer contributions too.”
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