Opportunities in Fund Raising: United Kingdom’s Pension System

Knowledge for getting the most from the advinda Premium goUK&Ireland Pension & Insurance Package.

Population: 63.7 million

Pension system design

Pensions in the United Kingdom fall into three major divisions, including both defined-benefit and defined-contribution:

  1. State Pensions
  2. Occupational Pensions
  3. Individual/Personal Pensions

Since April 6, 2016, 35 qualifying years are needed to receive the full basic state pension. Longer-term, the retirement age for both men and women will rise to 68 by no later than 2046.

Public Pension

The UK State Pension system is composed of

  • The basic pension (mandatory) – “contribution-based” benefit depending on an individual’s National Insurance (system of taxes paid by workers and employers) contribution history; payable at a flat rate of max. £122.30 a week (2017) increasing every year by whichever is the highest of: a. average percentage growth in wages, b. percentage growth in prices, or c. 2.5%; at least 10 qualifying years on National Insurance record to get any State Pension (not necessarily in a row); “Additional State Pension” paid, if State Pension age is being reached on or after 6 April 2016
  • The State Second Pension (S2P) (voluntary) – contribution age raises to 67 for men and women by 6 April 2028; level of pension payable is related to the recipients earnings via their National Insurance contributions, qualification is based on earnings at, or above, the LEL
  • The Pension Credit: principal element of the UK welfare system for poorer people of pension age, consisting of two elements
    • Guarantee Credit: an income based benefit which is paid if the income of the applicant and partner (plus a notional income from savings) is below a certain level
    • Savings Credit: an inverse means-tested benefit; the higher the individual’s private pension income, the more they receive in Savings Credit, up to a certain limit

Occupational Pensions

  • By 2018 all employers must provide a workplace pension scheme, called ‘automatic enrolment’, under determined criteria
  • Tax reliefs granted by the government
  • For external funding two plan types: insurance schemes provided directly by insurance companies and pension funds (self-administered plans)
  • Industry-wide schemes are not common in the UK

Private pensions

Private pension investments equivalent to: 97.4% of GDP (2015)

Private pension assets 2015: $ 2,273,713.0 million USD (all forms of private investment with a value associated to a pension plan over which ownership rights are enforced by institutional units, individually or collectively. This indicator is measured in millions of USD; source: OECD)

Pension funds’ assets 2015: $ 2,273,713.0 million USD (assets bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. The pension fund is a pool of assets forming an independent legal entity. This indicator is measured in millions of USD; source: OECD)

Net pension replacement rate 2014: 28.5% (individual net pension entitlement divided by net pre-retirement earnings; measures how effectively a pension system provides a retirement income to replace earnings. This indicator is measured in percentage of pre-retirement earnings by gender; source: OECD)

Sources:

The British Government – https://www.gov.uk

The Organisation for Economic Co-operation and Development (OECD) – http://www.oecd.org

European Actuarial & Consulting Services – http://euracs.eu/summaries/belgium-pension-summary/

2017-12-14T13:03:27+00:00 November 14th, 2017|