Private pensions are used to help people save for retirement. Most people need to supplement their state pension with additional saving, if they are to have a decent standard of living when they stop working, and private pensions are the primary way that people save additional money for retirement.
Household surveys, like Understanding Society, ask participants about private pension savings, alongside other household characteristics and life circumstances. This allows researchers to understand pension saving in a wider context.
The Institute for Fiscal Studies (IFS) uses data on pensions from household surveys in the UK, including Understanding Society and the Wealth and Assets Survey. They wanted to see how the data in these surveys compared to data collected in the Annual Survey of Hours and Earnings (ASHE) dataset, which provides employer-reported measures of workplace pension saving, which is considered to be a high quality measure of workplace pension savings for employees.
Findings for Understanding Society data
Understanding Society collects data on current membership in, and contributions to, workplace and private pensions. When the IFS looked at the percentage of people currently participating in a workplace pension they found that the Understanding Society data tracks very closely to the ASHE data. The two datasets show a very similar pattern, with pension participation increasing over time in the private sector from 2012 onwards (when automatic enrolment into workplace pensions started to be rolled out). The level of pension participation in the public sector is much higher and has grown by less since 2012.
When the IFS looked at the type of pension people had they found that the ASHE data and the Understanding Society data showed similar trends for private sector workers, but that for public sector workers the number who report saving in a defined benefit pension is lower in Understanding Society than in the ASHE data. The number who report saving in a defined contribution pension is higher in Understanding Society than in ASHE. Both these differences are growing over time, suggesting that many public-sector employees are not clear on what type of pension they are saving in.
The IFS says, “The quality of workplace pension saving data is generally good in Understanding Society. The data in Understanding Society closely match the trends in workplace pension participation in the ASHE and are not dissimilar to the distribution of employee contributions found in the ASHE.”
Note for researchers: In preparing this report, the IFS identified an issue with workplace pension type variable (penmtp) in Waves 10 and 12 of Understanding Society. This error will be corrected in the Wave 13 data release in November 2023.
Money and finances
