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04

DB pension payouts to peak in 2012, says DWP

Open-access content Tuesday 3rd April 2012 — updated 5.13pm, Wednesday 29th April 2020

Final salary pension scheme payouts will reach a record high and peak this year, before a steady decline due to scheme closures, according to figures from the Department for Work and Pensions.

2

The average defined benefit pension in payment will peak at around £7,100 a year towards the end of 2012 and will fall to just above £2,400 a year by 2060.

Pensions minister Steve Webb said the watershed marks a significant shift in pensions saving and confirms a definite need for workplace reforms such as auto-enrolment.

"A generation ago employers provided final salary pensions and took on all the uncertainty - the perfect retirement solution for those lucky enough to have one," he said.

"With payouts peaking this year, final salary schemes closing and figures that show that only 38% of working-age people are saving into a private pension, it's clear that we are facing a different world in pensions."

Webb pointed to the single-tier state pension as a crucial measure, with one in three people now expected to live to 100.  

Currently, around six million pensioners benefit from some form of DB scheme but only 10% of firms have final-salary schemes that are still open.

The DWP hopes that auto-enrolment, which will be introduced in stages from October this year, will see 10 million more people enter pension saving.

This article appeared in our April 2012 issue of The Actuary .
Click here to view this issue

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