Increases in pension income from triple-locking the state pension and the rise in defined contribution scheme provision through auto-enrolment appear to be compensating for the projected decline in income from defined benefit schemes, according to official data.
A Department for Work and Pensions ad hoc research report published today (23 March) revealed that pensioner incomes are forecast to maintain their value against the wider economy over time, seeing a slight increase over the coming decades.
State pension amounts are forecast to marginally increase in real terms over time, owing to the impact of the triple-lock uprating - where state pension amounts increases are based on the highest of price inflation, increase in earnings or 2.5 per cent.
DC provision and amounts in receipt are forecast to increase, due in large part to the impact of auto-enrolment and the escalation in contribution rates in the coming two years.
This is offset by provision and amounts in receipt from final salary schemes reducing, as employers continue to scale back on their legacy final salary schemes.
The report found a noticeable shift from DC to DB schemes over time. In 2014 income from DB-only schemes was the most common (around 40 per cent) and income from DC-only schemes the least widespread (around 5 per cent).
However, by 2060 this pattern is set to be reversed, with income from DC-only schemes being the most popular (around 50 per cent) and DB-only schemes being the least common (around 5 per cent).
The increasing prevalence of DC pensions also means there are less people with no private pension coverage. Initially around one in five people have no DB or DC scheme amounts, but by the late 2030’s this reduces to approximately 1 in 10.
Mean state pension amounts are also set to slightly rise over time due to the triple-lock, increasing around 20 per cent to approximately £161 per week by 2060.
Auto-enrolment is predicted to lead to a considerable increase in DC scheme mean amounts over time, again by 2060 the mean amounts should rise by 220 per cent to around £78 per week.
Conversely, DB scheme mean amounts are seen to reduce by 65 per cent by 2060 to around £36 per week.