We all know that people are living longer, which impacts on many areas of welfare, society and finance. Fraser Smart, Managing Director of Buck Consultants, discusses the data from the 2011 census:
“Much of what this data reveals should come as no surprise to those of us in the pensions industry, people in England and Wales are living longer than they did 100 years ago. There is a decreasing proportion of the population that is aged under 15 and an increasing proportion that is aged 65 and over. The percentage of residents aged 65 and over was the highest seen in any census at 16.4 per cent, which means that one in six people in the population was 65 and over in 2011. In 1911, the figure was one in twenty.
“Very worryingly the number of active members of occupational pension schemes is at the lowest level since the 1950s. Employee membership of employer-sponsored pensions in the private sector fell from 46% in 1997 to 32% in 2011. In 2010 the average worker in a private sector defined benefit pension scheme contributed 5.1% of salary to their pension, compared with 2.7% for employees in defined contribution occupational pension arrangements.
“Great news we are all living longer, as no doubt we all wished for. However, this has now come to the attention of those in authority and, with an ever increasing percentage of the population relying on pension income. We are awaiting with interest the Government’s proposals on defined ambition pensions which are expected later this year. Radical reform of pensions arrangements are needed to meet the needs of a growing population of pensioners in the wake of the disappearance of final salary pension schemes.
“I would love final salary schemes to make a comeback, but the reality are that most are in their endgame paying out benefits rather than accruing new liabilities. Will the Government be brave enough to remove the shackles which led to a large extent to the disappearance of final salary schemes? We will have to wait and see.”