Week 5: Investing for retirement – planning your pension

Introduction

Watch the following video to hear Martin introduce Week 5 of Managing my investments. This week covers the crucial subject of pension planning.

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MARTIN UPTON

Hello again, I’m Martin Upton from The Open University’s True Potential Centre. Welcome to the penultimate week of Managing my investments .

This week is entirely devoted to the crucial subject of pensions and how to ensure that you have sufficient income to retire in comfort. We look first at State Pensions and at the reforms to these that are unfolding in the UK.

We then examine different types of pension products – from occupational pension schemes to personal schemes that are unrelated to your place of work. We examine how pension incomes are determined from the fund that you compile prior to retirement.

And we also examine closely the pensions revolution that is unfolding in the UK and which is giving us greater flexibility in how we draw on and spend our pension ‘pots’.

The truth is that many people don’t plan properly for their pensions – either putting off starting a plan in earlier life or not focusing on the income, and hence living standards, that the pension is projected to provide.

So don’t turn a blind eye to pension provision – open your eyes and start planning for an enjoyable retirement! Have a great week!

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Making provision for your income in retirement is a critical aspect of your overall investment strategy. It requires long term forecasting of your income needs in retirement and the returns from your pension products intended meet those income needs. Given the recent liberalisation of pension rules in the UK, there are now more options for using the ‘pension pots’ built up ahead of retirement. While this has been generally welcomed, this liberalisation has created uncertainty about the best options to utilise the money built up for retirement.

When planning for income in retirement, it is clearly essential to take into account the state pension you may be entitled to. When you have forecast your state pension, you will have a clearer idea about how much income your own pension plans (e.g. occupational pension or personal pension) will need to generate to provide the total income you need in retirement. In the UK, state pension arrangements are going through a period of transition with the state pension age being pushed back and with the roll out, from 2016, of the new ‘flat-rate’ state pension.

There’s a lot to examine this week, particularly given the concurrent changes to the pensions landscape. But the effort will be worthwhile, since you will gain greater clarity about what you need to do now to ensure a comfortable retirement in the future.

5.1 Investing for a pension

A central and vital part of investment activity relates to investing in pension schemes to produce an income stream in retirement. How does the UK fare when it comes to this vital activity?

Table 5.1 sets out the percentages of adults in the UK who were active members of pension schemes in 2016–18. The data, compiled by the Office for National Statistics (ONS), does not provide an overall picture, since the numbers will not include those who were members of schemes but have deferred receipt of pension benefits. The data also excludes those who have retired already and who are drawing pension income. Additionally the data does not reflect those that are simply investing in assets outside a formal pension scheme to provide for their retirement.

Notwithstanding these limitations, the data points to a worrying conclusion – that a significant proportion of adults are not making their own provisions for retirement and may, as a consequence, become entirely reliant on their state pension when they do retire. The situation was little changed by 2021/22 with the participation in pension schemes amongst working-age adults being 55% for males and 52% for females (DWP, 2023).’

On a more positive note the percentage of adults – both male and female – participating in a pension scheme has been growing in recent years. One reason for this has been the introduction of automatic enrolment onto ‘workplace’ pension schemes that was rolled-out in stages in the UK in the 2010s.

5.1.1 How much do you need?

In Week 3, you looked at the process of forecasting the size of the pension you need in retirement, using the Age UK pension planning tool. Even if you accessed the tool in Week 3, you might want to try it again here as the starting point for your pension plan.

In doing so, you need to take into account how your spending needs in retirement may vary from those during your working life. These differences could include:

• lower day-to-day travelling costs as you will not be commuting to work
• savings on work-related costs such as National Insurance Contributions (NICs) and pension contributions (NICs are not deducted from pension income)
• higher holiday costs given the greater spare time you will have
• higher utility bills given the longer time you will be spending at home
• possibly, later in retirement, more spending on health-related items
• savings on a range of items due to the ability to take advantage of ‘off-peak’ pricing
• possibly lower housing costs since, by retirement, most homeowners would have completed paying off their mortgage.

To help your analysis of the pension income you need, watch the video where Martin and his Open University colleague, Jonquil Lowe, talk about how to start pension planning.

The video was filmed in 2015. However, the issues explored remain relevant to retirement planning.

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Martin Upton

It's a very important starting point, when it comes to pension planning, which is, do some budgeting, first of all. You've got to work out, how much reasonably, you need to have per week, per month and per year, in retirement,to have a satisfactory, and hopefully, a good retirement and a good lifestyle in retirement. That's what you've got to do, first of all, some budgeting. Any tips when you're going about that budgeting process? Budgeting for life and retirement.

Jonquil Lowe

Yes. There's some interesting research that's put out, every year, by the Joseph Rowntree Foundation, in conjunction with Loughbrough and York Universities. They publish something called the mimimum income standard, and what they do is go to real people and they so ok, what are the things that you think are needed to have a basic lifestyle in the sense of not uncomfortable, but not extravagant, either. What they came out with, for a single pensioner, is that they need to spend about £260 per week, so that's what? £13,000 a year basically, so you might take that as ok thats a kind of starting point, but if you've got interesting hobbies or other needs, then you'd probably want more than that, but that gives a baseline to start working from.

Martin Upton

Yeah. That's the baseline you need to start working from, but then you really need to ask yourself the question, 'What are my essential non-essentials'? 'What would make it a miserable retirement, for me, if I couldn't do...?' even if by doing that thing, it doesn't really stop me living reasonably comfortably, eating well, being warm, etc. For example, if you couldn't afford to pay for your golf club fees, in retirement, would that really wreck your retirement? Similarly, if you couldn't afford to pay for gym fees, or a season ticket for football club, do those sorts of things really tell you, 'I can't really retire without doing those things without my retirement actually being not the retirement which I want?' so, you've got to add on those non-essentials to those essentials to work out what your base income is in retirement, and work back from there.

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Once you have completed this section, you should be building up a picture of the income needed in retirement. The next section is to determine how much of this you anticipate to receive through your state pension entitlement.

5.1.2 State pensions

Figure 1 In the past state pensions were paid out at the post office.

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This photograph shows a pensioner picking up her pension at the post office.

Figure 1 In the past state pensions were paid out at the post office.

We now turn to a particular and very important way that we can invest in funds: pension products. But before we look at the products we can enter into, it is important to understand how much we will get from the state pension scheme. Clearly, the greater the financial support availed by state pensions, the less we need to ensure that we provide pension income ourselves through building up a pension fund ahead of retirement.

Limited state retirement pensions were first paid in the UK in 1908. These were improved by the 1946 National Insurance Act which brought in flat-rate universal state pensions (with effect from 1948).

While various developments in state pensions have taken place since then, the main thrust of policy in recent years has been to limit public expenditure on state pensions.

The UK government has planned staged rises in the age at which people can receive their state pension, to reach 68 years in the mid-2030s, with further increases likely. Many predict that the state pension age will eventually rise to 70 years. One aim of these moves is that, on average, no more than a third of adult life should be spent in retirement. So, the longer the population lives on average, the higher will be the state pension age.

There are actually two state pension schemes in place in the UK. The ‘old’ scheme for those who reached state pension age before April 2016 and the so-called flat-rate pension scheme for those reaching state pension age from April 2016 onwards.

The ‘old’ scheme has two parts. The first part is the basic state pension which amounted to £156.20 per week for a single person in 2023/24. This amounted to circa 25% of average full-time earnings in 2023 compared with 28% in 1980. The reason for the decrease was that during the period from 1980 to 2011 state pensions were normally increased in accordance with the rate of price inflation which tended to be lower than earnings inflation.

However, from 2011 onwards, the basic state pension has increased each year with the higher of either earnings inflation, consumer price inflation or 2.5%. This is known as the ‘triple-lock’ – an arrangement that is proving to be politically controversial. Whilst this ‘triple-lock’ remains in place the basic pension should retain its value relative to earnings (or even rise a little faster).

Entitlement to the basic state pension depends on paying, or being credited with, National Insurance contributions (paid by employees and the self-employed) during working life. Credits are given for certain periods out of work, such as being ill, unemployed or caring for children.

People reaching state pension age before 6 April 2010 needed to have National Insurance covering roughly nine-tenths of their working life to get the full basic state pension. For people reaching state pension age on or after 6 April 2010, the required contribution record was reduced to 30 years – although this rose to 35 years from April 2016.

A shorter record means a reduced pension – although from April 2016 a minimum number of 10 years for those reaching state pension age has become required to get any state pension.

Wives – and, since April 2010, husbands and registered civil partners – can claim a basic pension of up to £93.60 (in 2023/24) based on their spouse’s or partner’s record if their own basic pension would come to less than this. From 2016 this stopped for those new to reaching state pension age.

The second part of the state pension – the additional state pension (or state second pension) – is restricted mainly to employees. It was first introduced in 1978, when it was called the State Earnings Related Pension Scheme (SERPS).

Whilst this additional state pension can materially add to the basic state pension large numbers do not benefit from it. Many people have been ‘contracted out’ of the state additional pension, which means that this part of their state pension has been replaced by a workplace or personal pension scheme in return for reduced or refunded National Insurance Contributions.

5.1.3 The new flat-rate state pension

From April 2016, for those new to attaining the state pension age (SPA) the state basic and additional pensions have been replaced by a single flat-rate pension (for 2023/24 of £203.85 per week).

For 2023/24, the UK government’s assessment of the minimum weekly income required by pensioners was £201.05 for a single person and £306.85 for a couple (whether married or not) (Age UK, 2023).

This contrasts with the situation in the mid-1980s, when the basic state pension was about the same as the minimum level of income that was deemed enough for a single householder to live on. Therefore, anyone relying solely on the basic state pension is now also eligible to claim a means-tested top-up.

Such means-tested retirement benefits can discourage saving for retirement because building up a small private pension simply reduces the amount of benefits that can be claimed. The change to a flat-rate pension from April 2016 was intended to ensure that the state pension no longer falls short of the minimum income required. As a result, far fewer pensioners will need to claim means-tested benefits and there will be no disincentive to saving for retirement.

The rules relating to UK state pensions, the new flat-rate state pension and the impact on both of our record of National Insurance Contributions (NICs) are quite complex. To help you through the maze, watch this video, in which Martin and his Open University colleague, Jonquil Lowe, talk about UK state pensions and the 2016 changes.

The video was filmed in 2015. However, the issues explored remain relevant to retirement planning.

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Martin Upton

Now, there are a huge number of complicated changes which are currently going through about UK state pensions; some of which are causing concerns. So let's just see now if we can work our way through the state pension maze and bring some clarity to the situation.

So, let's just ask you a basic question, first of all. It's been asked by people like Laura Ryan, Helen Hemington, Jeanette Dandy. Basically, the question is, what do I need to do to generate my state pension? You don't just get it, automatically, do you?

Jonquil Lowe

No, you have to build up a record of national insurance contributions, now, usually, you pay those while you're working, but there are lots of situations in which you might be credited with contributions instead, so that includes periods when you're off work sick, or you're in a very low income, or you have caring responsibilities. In those situations you're still building up your national insurance record. As you say, we're in transition so at the moment we're under an old system but from April 2016, so not this April but April next year, we move to a new flat rate pension, and you'll need 35 years' worth of contributions to get the full, flat rate pension.

Martin Upton

Ok, so it's all about your contributions record. So, if hearing what you say people want to find out, immediately what their contributions record is like, what it amounts to, where can they find that information?

Jonquil Lowe

If you go to the gov.uk website hunt for state pension statement. You'll get to an online service, or you can download a form to send in, and you'll get a statement of how much pension you've built up, so far.

Martin Upton

OK, some further questions around national insurance contributions. One specifically has come in from Elaine Ellis. If you've been a stay-at-home mum how does this affect the buildup of those contributions and, therefore, your entitlement to state pension?

Jonquil Lowe

This comes back to the national insurance credits that we talked about. At present, if you're a stay at home mum as long as your child is under 12, and you're getting child benefit, then you're getting national insurance credits that are protecting your record for state pension purposes.

Martin Upton

What if I'm on a really low income and I don't pay national insurance? Surely, I'm not contributing to my national insurance contribution record to generate my state pension. That question is coming from a number of learners.

Jonquil Lowe

There's a level at which you start paying national insurance contributions but you still count as clocking-up, your record, as long as you're earning at least £111 a week, at the moment. If you're beneath that, you're not building up a state pension unless you're getting credits for another reason. Now, one reason could be if you're claiming working tax credit, or universal credit, then, you will be getting national insurance credits to protect your state pension. No simple answer, there, you have to check your own situation.

Martin Upton

Ok, so, you're building up your entitlement to state pension, through your national insurance record. I've got that completely clear, but, some people, in addition to their plans to get state pension, are in an occupational pension scheme and some of those occupational pension schemes are what's called contracted out schemes, which means they're not paying in as an employer, so much national insurance than if you're not contracted out. That means, possibly, without your knowing it, your state pension is being eroded; undermined a little bit, because not so much national insurance is being paid in by your employer to build up your entitlement to your pension. It's a complicated area. Have I got that right?

Jonquil Lowe

It's complicated, I mean, you've got the rules right, but I don't really agree with your interpretation of it. I'll tell you how I see it; maybe we'll disagree. We talked about your national insurance record for your basic state pension and the fact the pension system is changing from next year, but at the moment we're under the old system. Set the basic pension aside. In addition, what you may be doing is building up a state additional pension and that's really if you're paying national insurance contributions on anything above the £111 week, then you're building up some additional pension, if you're an employee. If you're contracted out, it's really a way of the government outsourcing your state pension. So, if you're contracted out, both you and your employer are paying less national insurance, but that national insurance is going into your employer's pension scheme in order to provide you with pension instead of the pension you would have had from the state. It's diverting your national insurance to another place. You're not exactly being diddled out of your state pension you're getting an employer's pension, instead.

Martin Upton

I think you're fair I mean, you're not being diddled out of it. I think the issue is that a lot of people didn't realise it worked like that. I think a lot of people when they heard about the flat rate pension thought well, flat rate everybody gets it, at the same rate. It's not as simple as that, is it?

Jonquil Lowe

No, it's not. At the moment; under the current system that we have, when you get to retirement, your whole pension is worked out as if you had always been in the state additional pension and then, a lump is knocked off to take into account that some of it is coming from an employer's scheme, instead. Exactly the same rule applies with the flat rate pensions. When a flat rate pension is worked out, a lump is knocked off because some of your state pension is coming from your employer's scheme and that means that you may be getting less than the full flat rate. If you're still in work then you can build up, you'll be paying national insurance contributions, so you can build up more flat rate pension.

Martin Upton

So, carry on working, basically.

Jonquil Lowe

Yes, but it depends on your age. You may be carrying on working, anyway.

Martin Upton

Yes, and building back up to those 35 years. So the gold standard is 35 years of contributions?

Jonquil Lowe

That's right, for the full, flat rate, absolutely.

Martin Upton

Ok. Now, I have one specific question which I've got to ask about the changes. It's quite important and it has been posed by a number of people. One of those people, John Roberts, Sr. posed a question and it relates to something we say in Step 7.4, Managing my money. We talk about the end from 2016 of the current arrangements where a basic pension is paid to wives, even if their record doesn't justify payment of that pension, but the national insurance record of their spouse does. We say in that step that finishes in 2016. I just think we need to clarify that, don't we, because for the people who are already getting that, it doesn't stop, does it?

Jonquil Lowe

No, it doesn't. As I say, we've got the old state scheme until 05 April 2016. The new state scheme starts 06 April 2016. If you reach state pension age under the old system, then the old system rules continue to apply to you.

Martin Upton

The statement stops in 2016, for people who are getting to state pension age from 06 April 2016. I hope that has clarified that important point of detail. Thinking again about national insurance records, if I was working overseas could I carry on paying national insurance? What happens to my entitlement to state pension in the UK?

Jonquil Lowe

It's a complicated area. If you go to work overseas for two years or less, you might carry on paying national insurance in the UK, in which case, no change. Otherwise, when you go abroad you stop paying national insurance, here, which means you stop building up state pension, here. However, there are agreements between all the countries of the European Economic Area, so that's the EU, and with a few other countries, which means that instead, you build up an equivalent pension in that country. So, when you reach retirement, you'll get an equivalent of the whole pension but you'll get some from the UK authority and some from the authorities abroad. If you go to some other countries, it may be a different picture. You may be losing out on UK state pension and not necessarily getting any replacement pension in that other country. Go to gov.uk, the government site, and search for International pension centre and they can give you the information you need, for where you're going.

Martin Upton

Kathy Burns has asked, from looking at the national insurance record that she's got, can you top up with lump sums, your entitlement to state pension? I think you can, and I think it's quite efficient, isn't it?

Jonquil Lowe

Yes, yes it is. Again, we're talking old system/new system. So, if you're under the old system, the current system, and you reach state pension age before 06 April 2016, then from October of this year, you'll be able to pay some lump sum national insurance contributions, special ones called class 3A. You'll pay a lump sum and it will buy you extra state pension. You buy the extra state pension in chunks of £1 per week. The lump sum you pay varies with age and it actually looks like a very good deal. For 65 year olds, I think it's around about £900 lump sum for £1 a week state pension for the rest of your life and that's index linked, which is about half of what you would pay for the equivalent annuity.

Martin Upton

They're good deals. I think people in those circumstances should be looking at it, closely. I learned from my brother, last night, actually, that's exactly what he's done, and he did it without my guidance. Perhaps, he didn't trust me to give guidance, but anyway, he went ahead and did it and I said, Yeh, that looks like a good deal, because I've learned about that from Jonquil. A couple more question areas about the state pension. Amanda Finn has asked, will having an occupational pension affect your entitlement to state pension? Christine McDowell, Carol Millborough, Christine Ridgeway and Susan Knight have asked does being self-employed affects your entitlement to state pension. Surely, the answer is no, because it's all down to your national insurance record. Being in an occupational pension doesn't bar you from having a state pension; being self-employed or having your own pension arrangements doesn't bar you from having a state pension; it's down to your national insurance record. In a nutshell, is that right?

Jonquil Lowe

In a nutshell that's right for the new system, the flat rate system. At the moment, under the current system, we've already talked about contracting out, so, it could be that your state pension is a bit lower because you're getting that contracted out pension, as well. If you're selfemployed, then the additional pension does not apply, to you. You can only build up the basic pension.

Martin Upton

Final question area which has come up from Peter Birkbeck and Cowan Jennings on the subject of these changes to state pension which we've seen unfold in recent years, in particular, the pushing outwards into the distance of the state pension age; particularly, for women. I had and if not heated, then a lukewarm discussion with my wife, about this, the other day, who was saying all these changes are completely unfair. I mean, we used to get our state pension at sixty, and now that just sort of disappearing over the horizon. I suppose the question is, how fair are these changes, to women? Do you think there is bias, that men have lost out a little bit, with the pushing out of the pension age, but women have lost out big time? It seems to me, there's some merit in arguing that.

Jonquil Lowe

Yes. I think always the problem with fairness arguments is that it's easy to define fairness in many different ways. What seems fair to one person may seem unfair to another person. Women, traditionally, had a retirement age five years younger than their husbands, but, that was based on a system where women didn't work and were expected to rely on their husbands to support them which is pretty old fashioned, these days. Women, statistically live longer than men so, in a way you might argue perhaps it would be fairer if they retired later rather than earlier so they had the same number of years, in retirement. What the government is doing with the raising of the state pension age; what's underpinning that, is they think it's fair that people should spend no more than 1/3 of their adult years, in retirement, and so, as people live longer, the retirement age goes up, but each generation still has the same proportion of their life in retirement. Well, that's one way of arguing fairness. It's not going to be the way everybody sees it. Certainly, if you're caught on one side of a change, it can seem very unfair that someone born, just a month later, is treated differently. Change, unfortunately, always creates some anomalies, like that. What I would say is, think back to when state pensions were, well, don't think back because you weren't born.

[LAUGHTER]

Martin Upton

I can't that's 1908, wasn't it?

Jonquil Lowe

It was but the state pension age, then, was seventy. It was a very cheap system because most people died before they ever reached seventy.

Martin Upton

Yes, I know, I know, no life expectancy, at that point.

Jonquil Lowe

So actually 1/3 of adult life in retirement looks very generous, historically, even if we are seeing the state pension age rise.

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5.1.4 Understanding the new flat-rate pension

The new flat-rate pension began to be paid to those reaching state pension age from April 2016.

How much is this worth? How many years of National Insurance contributions do you need to receive it? What happens if you haven’t paid enough in contributions?

Work through the sums in this video and see what’s likely to be the overall effect on people’s saving habits.

The video was produced in 2015. However, the issues explored remain relevant to retirement planning.

Download this video clip.Video player: ou_futurelearn_mmi_vid_1063.mp4

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MARTIN

From April 2016, the current state pension system will be replaced with a new single flatrate pension. At 2014-15 rates, this is worth £151.57 a week. To get the full amount, a person needs 35 years of National Insurance contributions or credits.

If they have less than 35 years, they get 1/35th of the pension for each year, except that they must have a minimum number of years of contributions, which is expected to be 10, to get any state pension at all. So, work out how much pension someone would get with 33 years of National Insurance contributions. Well, someone with 33 years of National insurance contributions and credits would get 33/35 of a £151.57 = £142.91 a week of state pension.

The government reckons a single person needs a minimum of £148.35 a week to live on and will therefore provide means-tested benefits if actual income is less than this. Since the new flat-rate is more than this minimum, someone qualifying for the full state pension should not need to claim means-tested benefits. Therefore any extra saving they make for retirement feeds straight through to a higher retirement income with no benefits to be lost through a means test. But bear in mind that only 35 years are required for the full pension. So someone with a working life of say 52 years could have 17 years' worth of gaps in their record before their state pension is reduced.

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This ends our coverage of state pensions. You now move on to how we can supplement the retirement income we get from the state, with pension products such as occupational and other workplace pensions.

5.2 Occupational pensions

Figure 2 Life after work

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The figure is a photo of a retirement party at a workplace. The man retiring holds a cake. His colleagues are raising their glasses to him.

Figure 2 Life after work

Occupational pension schemes are set up by employers for their employees. They typically provide a package of benefits:

• a retirement pension for the employee payable from the scheme’s normal pension age (often 65) or later
• a tax-free lump sum for the employee at retirement
• a pension payable if the employee has to retire early due to ill health
• pensions for a widow, widower, registered civil partner and dependent children if the employee dies either before or after retirement – most schemes also pay such a pension to an unmarried partner
• lump sum life insurance if the employee dies before retirement.

There are generally two types of occupational pension scheme: defined contribution schemes (also called money purchase schemes) and defined benefit schemes.

5.2.1 Workplace pensions

Figure 3 UK workplaces must offer pension schemes.

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This is a photograph of workers in a car factory.

Figure 3 UK workplaces must offer pension schemes.

A major development in pensions occurred in 2012, with the commencement of the government’s ‘automatic enrolment’ scheme for pensions. From October 2012, employers started being required both to offer a workplace pension scheme to their employees and to automatically enrol them onto the scheme.

Workplace pensions can take various forms, such as the defined benefit and defined contribution occupational schemes you looked at earlier. They can also be in the form of personal pension plans, which you’ll look at later this week.

Large employers were the first to undertake this new approach to pension planning in the workplace. By 2018, all employers were automatically enrolling their eligible employees into a workplace pension scheme.

If employees do not want to be enrolled in the pension scheme offered by their employers they have to take action to opt out. So the prospect is that, for many, inertia will result in them becoming, and remaining, enrolled in a workplace pension scheme.

Automatic enrolment is an important initiative to get people to contribute to a pension plan, although some criticisms have been voiced about the scale of the fees levied on those enrolled onto schemes.

5.2.2 Workplace pensions: NEST

Figure 4 A retirement NEST-egg.

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This is the logo of 'nest' – the National Employment Savings Trust.

Figure 4 A retirement NEST-egg.

In 2014, the UK government announced plenty of policy initiatives for pensions. One came with the announcement that, from 2017, those in state-backed workplace pension schemes, like the ones examined in the previous section, would have greater scope to invest in the NEST (National Employment Savings Trust) pension scheme.

NEST is the public organisation set up by the Pensions Act 2008 to offer pension products for employers offering workplace auto-enrolment schemes.

NEST started to take on pension fund members from 2012, when auto-enrolment into workplace pensions started to be offered by the larger employers in the UK. Under this scheme employees have to take action to opt-out of a workplace pension if they wish to avoid auto-enrolment. By 2019, 7.9 million workplace pension savers were invested in the NEST pension scheme (NEST, 2019).

5.2.3 Personal pensions

Figure 5 How much leaks from your pension pot in fees?

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This illustration shows a bucket suspended in the air. The bucket is filled with holes and water is spraying out, forming a puddle in the shape of a pound sign.

Figure 5 How much leaks from your pension pot in fees?

Personal pensions and defined contribution occupational schemes are examples of defined contribution schemes, and all work in essentially the same way. The pension depends on:

• the amount paid in, which is invested in a pension pot
• how much the invested pension pot increases in value
• how much is taken out of the pension pot in charges
• how much the saver decides to draw out as a cash lump sum at retirement
• how much pension the remaining pot can buy at retirement (most commonly the pot is used to buy an annuity, but an alternative is income drawdown).

Anyone can have a personal pension and anyone can pay into a personal pension for someone else – so the main earner in a couple could pay into a plan for a partner who has a caring role.

Personal pensions (unlike occupational defined contribution schemes) do not necessarily offer a package of benefits. It‘s up to the individual to choose whether to buy extra benefits, such as life cover, a pension for a partner or increases to the pension once it starts to be paid.

Personal pensions and occupational defined contribution schemes expose the individual to a variety of risks. To understand these risks, put yourself into the position of someone who is currently many years from retirement, and who has to organise their own pension scheme to provide themselves with retirement income.

How much should you pay into the scheme? It’s important to get this decision right because if you pay in too little, your pension will be too small. Pay in too much, and you could limit your current spending and standard of living, but you can’t be certain of the correct amount. The eventual cost of the pension will depend on these factors:

• Investment returns: as you have seen earlier in the course, when investing for the long term – and pension savings are very long term – stock market investments, like shares and bonds, are likely to be most suitable. It’s impossible to know in advance how well these investments will perform. If, in planning for retirement, you assume they will perform well, you don’t need to invest too much. If your assumption is wrong and the investments turn out badly, you’ll have too little in your pot to provide the pension you wanted. What counts here is the investment return after all the charges have been deducted. An investment fund that offers the chance of higher returns but has high charges might be a poor choice compared with a less ambitious investment fund with modest charges.
• Inflation: Rising prices reduces the buying power of money. To protect against this, you would need to invest extra money to compensate for the effect of inflation, both over the years when the savings are building up and once the pension starts. But you’ll also have to estimate what rate of inflation to guard against. If your estimate is too low, in real terms you’ll have a smaller pension than planned.
• Longevity: the aim is that the pension, when it starts, will provide a regular income, usually paid monthly, until your death. The longer you live, the more months of pension that have to be paid out, and the greater the total cost of the pension. In deciding how much to save, you need to make an assumption about how long you will live or the cost of insuring against living ‘too long’. If your assumption is wrong, either the money will run out before you die or you’ll have saved more than you needed to.

Therefore, defined contribution schemes, including personal pensions, lead to individuals shouldering the risks up to the time when the pension starts. This means that different people saving the same amount can receive very different pensions, and a person’s pension can be markedly different depending on when they retire.

On reaching retirement, you can protect yourself from further longevity risk by buying an annuity that will provide an income for the whole of your remaining life, however long you live. In effect, this is insurance against living for longer than your pension pot would otherwise last. However, the annuity provider will take a slice of the pension pot in charges before what remains is turned into income.

A revolution to defined contribution schemes, however, was presaged in the 2014 budget statement by the Chancellor George Osborne. From April 2015, those retiring have had access to a wider range of alternatives to buying an annuity with their pension ‘pots’.

Additionally, those aged 55 and over can cash in all or part of their pension savings prior to retirement, with 25% of each lump sum drawn out being tax free. After retirement, withdrawals will be taxed as income. So those approaching retirement now have greater flexibility to choose where to invest their pension savings to provide for an income in the future or other purposes.

5.3 Calculating pension income

Learn how to work out amounts of pension at retirement under defined benefit schemes in this video.

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MARTIN

Let's practise working out how much pension people can receive from their final salary scheme. Here are three examples.

John retired after 20 years in a 1/80th scheme, his pay at retirement was 34,000 pounds a year. What's his annual pension? Do a quick calculation.

Let's check the answer. John's pension was 1/80th x 20 years x 34,000 pounds = 8,500 pounds a year.

If Paula stays in her 1/60th scheme until retirement, she will have been a member for 15 years. Assume her pay then will be the same as today: 51,000 pounds per year. What's her annual pension?

Here's the result: Paula can expect a pension of 1/60th x 15 x 51,000 pounds = 12,750 pounds a year.

Lewis is 27 now and has just joined his scheme. He expects to be a member of his 1/80th scheme until the age of 65. Assume his pay then will be the same as today: that is, 25,000 pounds per year. What's his pension?

The answer is: Lewis can expect to have 65 - 27 = 38 years in the scheme. His pension would be 1/80th x 38 x 25,000 pounds = 11,875 pounds a year.

Why do you think using pay today in the pension formula might give a reasonable guide to pension at retirement? Well, working out pensions from a final salary scheme using pay levels today means we assume that the expected pension is approximately adjusted for inflation between today and when the pension is drawn.

This is a reasonable assumption for a person who stays in their scheme until retirement because over the long term we expect earnings to rise by at least the same rate as prices. If the person leaves the scheme before retirement, the pension they have built up will typically be revalued with price inflation up to a limit, so using today's pay is still a useful guide. Good to know, isn't it!

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Figure 6 Salaries and pensions, based on a 40-year career

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This graph shows how the pensions paid to a teacher and a headteacher have changed as a result of moves from final salary schemes to career average schemes. The teacher started their career on £22k and ended it on £32k. As such, both their final salary and career average pensions would be equivalent to £21k. The headteacher started their career earning £22k, but ended it on £75k. Their final salary pension would be £50k, but their career average pension would be £39k.

Figure 6 Salaries and pensions, based on a 40-year career

5.3.1 Understanding career average pension schemes

In the previous section, you looked at the move by some defined benefit pension schemes to base the pension paid on career average earnings rather than the final annual salary prior to retirement.

The following audio animation shows how these ‘Career Average Revalued Earnings’ or ‘CARE’ schemes work, using the UK’s National Health Service (NHS) CARE scheme as a case study.

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MARTIN UPTON

This animation illustrates how a C-A-R-E pension scheme works. C-A-R-E, or simply Care, stands for career average revalued earnings.

With a CARE scheme you earn a proportion of your pensionable pay as pension each year you work. In this case it is 1/54th of pensionable pay per year. For example if Jane earns £18,000 a year her pension pot in year 1 is worked out as one-fifty fourth of £18,000, or £333. This pot is then 'revalued' each year, using an agreed formula, to take account of price inflation. For this example let's say the pot is increased by 3.5% per year. So at the beginning of year 2 the £333 that Jane earned in year 1 is revalued by 3.5%. This means that this part of Jane's pension is increased by £12 (or £333 x 3.5%), and this gives a revalued total of £345 (or £333 + £12). The pot continues to be revalued each year until Jane retires after 20 years of service. After 20 years of being revalued by 3.5% each year Jane's year 1 retirement pot is worth £640. Jane receives a new pension pot for each year she is a member of the CARE pension scheme. So after 20 years she will have 20 separate pension pots. If Jane's pensionable pay rises by 4% then in year 2 she will be earning £18,720 and her year 2 pension pot for that year will be worth £347. Every year's pot then gets revalued in the same way that the year 1 pot is revalued. On retirement Jane adds up the pension pots earned from each year of service after each year's pot has been revalued. The total is her pension on retirement. So if Jane's pensionable pay rises by 4% every year, after 20 years' service, she can expect a pension of £13,422 per annum.

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5.3.2 Funded and pay-as-you-go pensions

In the previous sections you might have worked out that average salary pensions would be cheaper to provide than final salary schemes if, even after adjusting for inflation, a worker’s average pay over many years was lower than their pay just before retirement.

Workers whose pay tends to peak in mid-career might gain from a switch, whereas workers whose pay tends to peak towards the end of their career would lose out. So, in the example of teachers, a person who reached the position of head teacher would lose out in relative terms from this change.

5.3.3 Take control

Figure 8 Time to calculate if you’ll have enough income in retirement.

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The image is a drawing of a calculator in the palm of a hand.

Figure 8 Time to calculate if you’ll have enough income in retirement.

We have now looked at state pensions and the various forms of non-state pensions that collectively can provide your income in retirement. Take some time now to check your entitlements to pensions using the information provided in the previous sections and the most recent statements provided by your pension provider(s).

In the coming sections, you’ll hear how the pensions landscape in the UK is changing following the liberalisation of rules relating to access to ‘pension pots’ that took effect from April 2015.

5.4 The 2015 pensions revolution: freeing up access to pension pots

In his 2014 Budget Statement the then-Chancellor, George Osborne, unveiled proposals for pensions reform which have changed the financial options for those approaching retirement. These proposals took effect from April 2015 and have led to restrictions on access to pension pots being eased.

Figure 9 George Osborne – Chancellor of the Exchequer 2010-2016

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The image is a photo of George Osborne, Chancellor of the Exchequer 2010-2016.

Figure 9 George Osborne – Chancellor of the Exchequer 2010-2016

These are the key features of the pensions revolution:

The 2014 Taxation of Pensions Act provides greater freedom for those in ‘defined contribution’ schemes aged 55 years or more to access their personal pension funds (or ‘pots’). Basically, you now have many more options:

• Those retiring with defined contribution pensions now have alternatives to buying an annuity with their pension savings, though they can still do just that. On retirement, up to 25% of the fund can be taken as a tax-free lump sum (as previously applied prior to 2015) but you can still buy an annuity with the rest.
• What is new is that you can access the funds as cash to do what you want with, say, to invest in a range of assets (such as property) or to pay off a mortgage or other debts, or simply to finance current consumption. 25% of the funds accessed from the fund is tax-free. The rest is taxable as income and so could currently attract tax of up to 45% (for taxable income above £150,000).
• You can simply leave the money invested and draw down at a later date.
• There is also greater flexibility to pass on a pension to dependents after death. For those who die prior to the age of 75, income from pension assets can be passed on to beneficiaries tax-free provided this is done within two years of death. This tax treatment previously only applied to lump sums from a pension ‘pot’. For those who die aged 75 or over, normal income tax rates apply. Arguably, this reform removes an unfair excess tax charge on pension pots for which the deceased have spent their lives contributing to. An alternative view is that it provides a way to avoid inheritance tax, with those in retirement drawing on savings and other investments while leaving their pension funds untouched.

One key thing to remember whatever option is chosen is that pension income – including state pension – is liable to income tax. The good news, though, is that National Insurance Contributions (NICs) are not payable.

While the greater flexibility that these reforms provide for pensioners should be welcomed, a few concerns cannot go unmentioned.

First, one motivation for these greater freedoms seems, in part, to be the belief that annuities are poor value and, by inference, that other ways of investing pension funds may be better for pensioners. Yet while there have clearly been issues about how some insurance companies have sold annuity products, it is unfair to say that they are all poor value. The low annuity rates prevailing today simply reflect growing longevity and the currently prevailing low interest rates. Currently (in 2020) – and depending on the features of the product – an annuity of between £4000 and £5000 per annum is paid at 65 years of age for each £100,000 in a defined contribution pension fund. These figures apply to a single person. For a dual-life annuity (i.e. for a couple) annuities are less than £4000 per £100,000 of a pension fund.

Second, there are concerns that many pensioners will spend large portions of their pension pot and not invest the funds to provide the income stream needed in retirement. The risk is that within a few years, some pensioners will find themselves short of the income needed for a comfortable retirement.

Finally, there is a concern that the pensions industry is not resourced to deal with the advice required as a result of these wider freedoms now available to pensioners and those moving towards retirement.

5.4.1 Learning from the Dutch: collective defined contribution schemes

Figure 10 Can we learn from Dutch pension schemes?

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This is an illustration of a windmill, labelled 'Holland'.

Figure 10 Can we learn from Dutch pension schemes?

A further reform of pensions was announced in the Queen’s Speech in November 2014.

This proposed the introduction of ‘collective defined contribution’ (CDC) pension schemes. These have worked successfully in the Netherlands and involve workers pooling their pension contributions with thousands of others rather than just paying into their own pension fund. The rationale is that the greater collective size of a CDC fund would allow for a wider diversification of investments and a greater ability to manage investment risk, hence achieving more stable outcomes. The costs of running a fund would be proportionately less than for an individual pension pot, thereby also helping to boost the returns achieved.

Evidence from the Netherlands shows CDC schemes outperforming the average returns seen on conventional defined contribution schemes, with those retiring on a CDC scheme receiving on average 28% of their salary, as opposed to 21% on average from defined contribution schemes.

In April 2023 The Pensions Regulator authorised the first CDC scheme in the UK – the Royal Mail Collective Pension Plan. More schemes are expected to follow.

5.4.2 The challenges of the pension revolution

To round off our examination of pensions and the current pensions revolution in the UK, watch this video of Martin Upton and Jonquil Lowe answering questions posed by learners. The areas covered include issues about pensions schemes and the new freedoms that those retiring now have in making their pension arrangements.

The video was filmed in 2015. However, the issues explored remain relevant to retirement planning.

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MARTIN UPTON

Interesting observation you made, there, about occupational schemes versus private schemes. It seems to me you get a better deal if you're in an occupational pension scheme, as opposed to paying for it all, yourself. Has to be the case, doesn't it. If you're employer is putting in something then it's a better deal for you than actually doing it all yourself through a private pension.

JONQUIL LOWE

Absolutely, yes. Now employer's, traditionally, provided occupational schemes and particularly if you work in the public sector, local authorities, NHS, emergency services and so on, then you're going to be in a scheme that's called a defined benefits scheme that promises you a certain amount of pension. Although, you're going to be paying in quite high levels of contributions, for that, your employer is paying in even more. The total that goes into providing that pension, for you is probably about 1/5 or 1/4 of your pay but large chunk of that, 2/3 of that is being paid by your employer. Those are pretty generous schemes. What we've seen since 2012 is the rollout of automatic enrolment which means that all employers by 2018 are going to have to provide some kind of pension through the workplace, but most of them are not going to be these defined benefits schemes they are more likely to be the alternative, which is called defined contribution where contributions are paid in and you build up your own pot of savings that you then use at retirement, to provide your pension. Those are far less generous. Under automatic enrolment there are some transitional rules, but once we're past those, the total that will go into that pot is 8% of your own contributions and your employer only has to pay 3%.You pay 4% and then 1% comes from tax relief. A lot of people have said that's well and good; it's a great place to start, but that 8% is not enough for most people to provide the kind of pension that they want in retirement, so, you probably need to look at saving more.

MARTIN UPTON

We looked at the first stage which is how much I need in retirement; then the process by which you work back to what pensions provision have I got to do, now, and how I go about it? Let's just say you've now got your pension products running, you're not retired, yet, but then someone tells you or somebody advises you or you make up your own mind that actually you would be better off moving from your current pension products to other pension products which seem to offer a better deal. How easy is it to switch pensions? If I were to move money from one pension into another pension, does the taxman get in the way and take a slice, in the process?

JONQUIL LOWE

Let's start with that, first. No, when you transfer funds from one pension to another, it's all done behind the scenes and you're still inside that pension wrapper so there shouldn't be any tax to pay. Just a small warning, there, though, there are scams around where people try and persuade you to cash in your pension. Some of these are offshore, and if you do transfer to those, not only do you run the risk of losing all your money but then, your money actually had come out of the pension scheme and you might find that the revenue and customs are after you, for tax, as well, so don't fall for scams and be very, very wary if someone comes to you and says you ought to transfer your pension. It should be a decision that comes from you and you need to think it through. With transfers, there are usually charges.

MARTIN UPTON

What sort of level are we talking about?

JONQUIL LOWE

I can't really answer that. It really depends on the scheme. There are some stakeholder pension schemes that are specifically set up to be portable and can't make a charge for transferring out, but with other schemes, it really depends what kind of scheme you've got. For example, quite a lot of self-invested personal pensions might charge £25 for each holding that you have, within the scheme, so every fund, or every shareholding you have would have a charge, so, it's going to vary, a lot. The advice really has to be, check before you transfer what those charges will be.

MARTIN UPTON

Something to really take notice of are the changes coming to the pension scene in the UK. There's a potential for scams to emerge and for people to make imprudent decisions about the movement of their pension money. So, you've really got to keep your eye on the ball, everybody. On a related subject, you may say, ok, I'm happy with my pension arrangements, but what if my pension provider goes bust? Obviously, not in the recent past but several years ago, we did see stories of pensions going bust and pensioners losing their pension income as a consequence. What protection have people got?

JONQUIL LOWE

You are protected, these days, because of those past scandals. If you're in one of those defined benefits schemes we talked about, where you're promised a certain level of pension, there's a scheme called the pension protection fund so, all schemes, they pay a levee to fund this compensation scheme and if your employer went bust and couldn't pay the promised level of pension, then you would get most of that pension, in some cases all of that pension, up to a certain limit. I think it's somewhere around £32,000 is the maximum that you would get from the compensation scheme. Another type of fraud we saw, way back, was with Maxwell.

MARTIN UPTON

Early nineties or late eighties, wasn't it?

JONQUIL LOWE

Yes. That was when money was just stolen from the pension scheme. There is also another fund called the fraud compensation fund which exists to replace assets that are lost, and provides replacement pensions, up to a certain limit.

MARTIN UPTON

Ok. A questionnaire came in from Sue Coddling and Faith Warren and I shall do a name check for people who asked about the ability to swap from one scheme to another. They are: Helen Hemington, Joanne Salters, Carol Rand and Ian Picstone. So, we're moving on now through working life towards retirement. Maybe there's a few decisions people have to make about their pensions arrangements. One question that has come in from Angela Townsend is that you may find when you're approaching retirement that you've got a large number of relatively small pension pots. Does it make sense to consolidate them, and in particular, if you've got some very small pension pots, can you just take all the money out of that without there being a tax liability? I think if it's a very small pot that you've got considerably more ability and flexibility to take some of that money out, haven't you?

JONQUIL LOWE

You have, yes. As you know, the rules are changing from April, so from April, if you're aged 55 or over, you can take money out of defined contribution pension pots; at any time and in any way you would like, in any case, yes, you can take them as lump sums. There are some other rules at work, at the moment. They will carry on after April, and they apply to all types of pensions, so, defined benefit pension schemes, as well as defined contribution. These are the small pot rules. So, you have to be at least 60 rather than 55 to use the small pot rules. If all your pensions together come to no more than £30,000, or you have individual pots that come to no more than £10,000 you can take the whole of those as lump sums with the caveat that with personal pensions, it's limited to three small pots, in your lifetime. That's to stop people from having a big pot and then just carving them up into lots of little one's and saying, well, I'll just take them all as a lump sum. When you take your money out of these pots as a lump sum the first 25% is tax free and the rest is taxable. Should you combine small pots if you're going to buy a pension income? Usually, you can get a better deal with a bigger pot rather than a little one, so it is a good idea to combine.

MARTIN UPTON

OK, so as you're approaching retirement, then, a few decisions about making your overall pot an efficient size and giving you the best value from the money that you've accrued, over your working life and paid into the pension fund. Ok, now you're getting quite close to retirement, now, and you may take the view that for most occupations there is no statutory retirement age, so you'll give it a few more years and defer the pension or delay it, because if you delay it, the annuity you get, the annual income you'll get from your pension pot will surely be more than if I don't delay it. Is that worth looking at, for a lot of people? It seems to be that now, people are working longer and annuities haven't been fantastic in terms of levels, in recent years, because of interest rates. Is this something people should be looking at, closely? Delaying and getting a bigger annuity when you eventually do say, 'I've had enough of work and I am retiring, now'.

JONQUIL LOWE

Again, thinking about the changes from April, there's a lot more flexibility with pensions, anyway, and I think we're going to see fewer people buying an annuity, even when they do want to start taking an income, they might use a different arrangement. They might leave their pension pot invested and either draw off an income or take out lump sums as they need them. Deferring is usually going to be better, in the sense that, you're then investing your money for longer so it has more time to grow; more time to build up, and it's going to be paid out in a shorter period. If you did buy an annuity, that's reflected in the annuity rate which is then higher, at older ages. With annuities, I would just be slightly cautious because the annuity rate is very highly associated with long term interest rates, which we know are very low, at the moment. Looking to the future, they're more likely to be higher. That would help annuity rates.

MARTIN UPTON

But, longevity.

JONQUIL LOWE

Exactly. They're also associated with the general population living longer. That still seems to be increasing, so that puts a dampening effect on annuities. I think what we might see is a lot of people using their pensions flexibly between their state pension age which is around 65 or 68, depending on when you were born, up to about 85, and then, perhaps, buying an annuity at that age. I think we might see a pattern like that, but it's really too early to say how it's going to pan out, from April, and what new products we're going to see. I don't think we're going to have this bilateral split that we seem to have, at the moment, of either leave your money invested or buy an annuity. I think we will see a lot more products in the middle ground that give you some guarantee's and some flexibility.

MARTIN UPTON

Ok, that's a good question that came in from Paul Hogan. When you were talking about annuities, you were referring to new arrangements coming into the UK which kick-in in April which give, people that are looking at their pension pots, greater flexibility in terms of accessing and using those pension pots. An interesting question has come in from Steven Cockcroft. He asks, 'do the pension companies have to comply with these new, flexible arrangements for pensions'. Are there rules that say you, as a pension company, you've got to provide this flexibility, or, is it up to the companies.

JONQUIL LOWE

It is up to the companies. These are permissive rules in the legislation, but it's up to different providers to decide whether or not to provide all of these options. If they don't, then you would be in the position of needing to transfer your pension, if you wanted to take advantage of the options. I think this is difficult for company schemes. They were never designed to be run like bank accounts. Some of them might not offer the options at all, whereas others, perhaps they will but not be ready for April. All of these pension changes have been rushed in over the space of 13 months. It hasn't given providers a lot of time to adapt and get new systems up and running.

MARTIN UPTON

Ok. Two more questions about this pension cycle which we've been talking about in this series of questions. What if I die before I start my retirement and start to receive my pension income? What happens? Was it just a complete waste of money or does someone benefit?

JONQUIL LOWE

Let's talk again, about April because we're so close now and the rules are changing. If you're under 75, anything you leave in your pension pot, whether it's a pension you've started to draw or not then that can be passed on to tax free to anybody, and it doesn't have to be someone who is dependent, on you. If you're aged 75 or over you can pass it over to anybody, but then it's taxed at the normal tax rates that the person, receiving your tax pot, normally pays, with the exception that just for one year, this 2015/2016 year coming up, if they take it as a lump sum it's taxed at a rate of 45%. Again, that's just a transitional arrangement to give providers time to put new tax arrangements in place.

MARTIN UPTON

These new arrangements give much greater flexibility for pensions, effectively, pass on to people who can inherit the money from you.

JONQUIL LOWE

Absolutely, that's exactly right. They become a tax efficient way of planning for inheritance, which is quite surprising because in the past, we've had a lot of legislation that has been designed to stop you using a pension scheme as a form of inheritance, so, it's a big turnaround.

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5.5 Week 5 quiz

Check what you’ve learned this week by taking the end-of-week quiz.

Start quiz

Open the quiz in a new window or tab then come back here when you’re done.

Week 5 round-up

This week, you have explored the pensions landscape – focusing on the types of pension schemes in the UK. You’ve also examined the various pension products that can be used to augment the state pension.

You have also looked at how pension planning involves a careful forecast of your spending in retirement – essential expenditures but also aspirational spending – since, ideally, life in retirement should be more than just ‘getting by’ through spending on essentials only. Remember, with growing longevity, pensions planning is the most serious investment activity you are likely to engage with.

Don’t forget to continue with Activity 2.4 and check the prices for the selected companies once a week and enter their level in the Market shares tracking worksheet. Remember, you can follow these shares using the BBC Market Data tool, or by picking up a newspaper which focuses on financial markets.

Next week, you’ll complete Managing my investments by focusing on how behavioural factors influence investment decision-making, sometimes with adverse consequences.

You can now go to Week 6.

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This free course was written by Martin Upton.

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References

Age UK (2023) Pension Credit, Factsheet 43, April 2023 [online] Available at https://www.ageuk.org.uk/ globalassets/ age-uk/ documents/ factsheets/ fs48_pension_credit_fcs.pdf (Accessed 12 October 2023)

Department for Work and Pensions (2014) Family Resources Survey [Online]. Available at www.gov.uk/government/uploads/system/uploads/attachment_data/file/325491/family-resources-survey-statistics-2012-2013.pdf (Accessed 10 December 2014).

Department for Work and Pensions (DWP) (2023) Family Resources Survey: financial year 2021 to 2022, Table 6.1 [online] Available at https://www.gov.uk/ government/ collections/ family-resources-survey--2 (Accessed 12 October 2023)

NEST (2019) ‘Nest celebrates growth of pension scheme’ [online], https://www.nestpensions.org.uk/schemeweb/nest/nestcorporation/news-press-and-policy/press-releases/Nest-celebrates-growth-of-pension-scheme.html (Accessed 14 December 2020)

Office for National Statistics (ONS) (2017) ‘Occupational Pension Schemes Survey UK, 2016’ [Online]. Available at https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/pensionssavingsandinvestments/bulletins/occupationalpensionschemessurvey/uk2016 (Accessed 30 November 2017).

Office for National Statistics (ONS) (2019a) ‘Pension wealth in Great Britain: April 2016 to March 2018’ [online],https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/pensionwealthingreatbritain/april2016tomarch2018#:~:text=5.-,Trends%20in%20active%20private%20pension%20wealth%20%E2%80%93%20membership,March%202018%20(Figure%203) (Accessed 30 November 2020)

Office for National Statistics (ONS) (2019b) ‘Occupational Pension Schemes in the UK’ [online], https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/pensionssavingsandinvestments/datasets/occupationalpensionschemessurvey (Accessed 14 December 2020)