The ‘market value’ of occupational pension schemes in the UK rose to £2.48trn, as at the end of June 2021, new figures from the Office for National Statistics (ONS) have revealed.

The market value, or net assets excluding derivatives, of schemes increased from £2.38trn at the end of March 2021 to £2.48trn.

Occupational pension schemes had assets of between £2.48trn and £3trn depending on the measure used.

The value of gross assets excluding derivatives was £2.69trn at the end of June 2021, while the value of gross assets including derivatives contracts with a positive value totalled £2.98trn.

Private sector defined benefit (DB) and hybrid schemes saw their market value increase by 3 per cent between March and June, while private sector defined contribution (DC) schemes’ market value rose by 9 per cent.

Private sector employee contributions into DC schemes increased by 19 per cent between Q2 2020 and Q2 2021, while employer contributions grew by 18 per cent over the same period.

However, total employee and employer contributions fell by 14 per cent and 9 per cent respectively from Q1 2021 to Q2 2021.

Both components of total employer contributions added to this decline, with deficit recovery contributions (DRC) declining by 14 per cent and non-DRCs falling by 5 per cent during the same period.

The ONS noted that employee contributions had also fallen from Q1 to Q2 in 2020, with the decline in both 2020 and 2021 during this time partly attributed to year-long contributions made at the end of the financial year.

As at the end of June 2021, 71 per cent of private sector schemes’ direct investments were in long-term debt securities, 10 per cent were in equities, and 6 per cent in unquoted private equity and alternatives.

Meanwhile, 41 per cent of public sector schemes’ direct investments were in equities, 22 per cent were in unquoted private equity and alternatives, and 22 per cent were in long-term debt securities.

The ONS stated that this difference in asset allocation reflected the differences in age profiles, risk and regulatory environments between the two sectors.

Membership of private DC schemes rose by 3 per cent in Q2 2021, from 24.6 million to 25.3 million, while membership of private and public DB and hybrid schemes remained stable.

Commenting on the figures, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, said: “While there were concerns the pandemic would lead to an exodus from pension schemes and plunging contribution rates, the growth of DC schemes is undeniable with membership soaring to 25.3 million at the end of June 2021.

"The pandemic had an enormous effect with furlough and increased redundancy rates meaning employer and employee contributions temporarily plunged last year but they have since bounced back and membership continues to grow. DB scheme membership is flat as expected.

"While contributions and memberships are on the rise, we can also see an increase in benefits being paid out. Between Q1 and Q2 2021 we saw a sharp 51 per cent increase in pension payments and income withdrawals – including death benefits for DC schemes.

"This compares to around 9 per cent in private sector DB. While some of this will be explained by the horrible death toll of the pandemic, we could also see this as evidence that people have chosen to retire early or access their pension early to cover financial expenses.”

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