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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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