Assessment of Funded Occupational Pension Scheme Statistics

Published:
19 July 2022
Last updated:
18 July 2022

Public Value

Public Value of UK Funded Occupational Pension Schemes statistics

1.15 ONS publishes FOPS statistics quarterly around six months after the end of the reference period. The primary purpose of these statistics is to provide data that are used in the UK National Accounts and UK Balance of Payments.

1.16 The FSPS is used to collect data on income and expenditure, transactions, assets and liabilities of FOPS. Due to issues with the Central ONS Repository for Data (CORD) data processing platform, ONS is currently able to use only income and expenditure data in the National Accounts and not data on transactions, assets and liabilities. The annual National Accounts 2022 update will allow these further data to be implemented, with ONS expecting the first National Accounts dataset to use these data being published in September 2022.

1.17 As well as being used in the UK National Accounts, FSPS data also feed into the Organisation for Economic Co-operation and Development’s (OECD’s) internationally comparable National Accounts. The pension statistics team has also provided data to OECD for inclusion in its Pensions Market in Focus publication. The team attends annual working parties on financial statistics and private pensions. At the financial statistics working party the team provides insight to international National Accounts on the UK’s best practice by presenting FOPS statistics and FSPS developments.

1.18 ONS has a data sharing agreement and regular conversations with DWP to help fulfil DWP’s requests for different aspects of FSPS data, such as the countries that schemes are investing in, and which pension schemes are investing in the UK. The pensions statistics team works closely with DWP to establish where the FSPS can aid in providing vital information to inform on policy decision making.

1.19 FOPS statistics are used to assess and evaluate government policy on investments and pensions. For example, DWP uses FOPS statistics to evaluate the effectiveness of policy to incentivise DC schemes to invest more in illiquid assets. HM Revenue and Customs (HMRC) also uses FOPS statistics for evaluating the tax relief on extra payments made to reduce the shortfall of funding in a pension scheme. These statistics are also important for the Bank of England to monitor the financial stability of non-banks within the financial sector.

1.20 FSPS data are also used in the compilation of other statistics such as in HMRC’s Personal and Stakeholder Pension statistics, ONS’s Public Sector Finances and OECD’s Pension Markets in Focus release.

1.21 FOPS statistics are also valuable to academics and less-specialist users. Research into investment strategy and cross-country pension comparisons are aided by these statistics. Headline figures have been picked up by pension-focused media outlets especially around contribution trends.

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Future developments

1.22 The pension statistics team is keen to extract more information from the FSPS and publish data on a more regular basis or publish more explanatory articles of results from the survey. For example, users are interested in data on investment income and transactions, UK Gilt holdings and the underlying funds in which pension schemes invest, such as, large investment portfolios that are funded by several investors (pooled investment vehicles).

1.23 Users highlighted to us that they would like to see the following information published in FOPS statistics:

  • Pension pot per person and active membership information such as an explanation to users for what a growing or shrinking pension pot means per active member
  • Long-term performance of schemes in providing returns to members
  • Costs and expenses (admin or investment) of pension schemes arising over time
  • The benefits of different schemes, such as, income or lump sum withdrawals
  • The types of assets (infrastructure) being invested in and where the investment is being made (for example, in which country)
  • Further breakdowns on what is happening with membership and contributions in different income bands, age groups, industries and sectors

1.24 Some users are interested in long-term changes in pension membership and contributions. The bulletin provides insight about the trends within pension schemes, especially the change away from DB schemes towards DC schemes. However, with the redevelopment of the survey, a consistent time series including the old MQ5 PFS is not currently possible. This is due to the large differences in the sample, the balance of questions asked and ONS minimising respondent burden – as the FSPS was started part way through the year, the team was not allowed to despatch an annual MQ5 PFS which could have been used to align the quarterly series and make direct comparisons. Further work on specific lines of data may allow users to draw insight from long-term trends. ONS would need to clearly articulate the strengths and limitations of any such series to minimise the risk of misleading conclusions being drawn.

1.25 Several users told us that they were particularly interested in the risks associated with pension liabilities and more widely the systematic risk (if the pressure to improve returns leads to greater risk taking) to the UK banking system. To meet these user needs and future international standards from potential changes to the Balance of payments and international investment position manual (BPM6), ONS would need to collect additional breakdowns of data on financial derivatives[1], which are used for market risk management. We understand this is not a development that can be achieved in the short term, but user engagement must be at the heart of this development to understand the information needs of users.

[1] Financial instruments that are linked to another specific financial instrument, indicator or commodity and through which specific financial risks can be traded in their own right in financial markets

 

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Adding value by responding to users' needs for publishing FSPS data

1.26 ONS excelled in its user engagement in the redevelopment phase of the FSPS. Collaboration with both pensions experts and respondents to the survey has resulted in a survey that is now less burdensome for respondents to complete and more suited to collecting the key information users are looking for. Users attested to the responsiveness and helpfulness of the pension statistics team in answering questions and explaining the trends within the data. The team has built strong working relationships with users such as DWP and OECD. For example, the team meets DWP every six weeks to discuss the trends shown in the data and to answer questions relevant to policy decisions. This means ONS has a strong understanding of the data that DWP requires.

1.27 As a result of user engagement, ONS has improved the presentation of the FOPS statistical bulletin to meet users’ needs so that the March 2022 bulletin now separates clearly the three types of FOPS: private sector DC schemes; private sector DBH schemes; and public sector DBH schemes.

1.28 User engagement must go further to guide a plan for developments within the statistics. The pension statistics team has a lot of development ideas. However, these plans are not published or clear to users. Having a clear plan that is also transparent about improvements that are not currently possible, will clarify to users what additional value they may be able to get from the statistics in the future. This plan should be user-led and a result of engagement to understand what developments would be most valuable to users. This is especially important as staff resource limitations in the pension statistics team means that at present not all FSPS data are published. The current pension statistics team consists of three members of staff with posts to be filled. Due to unfilled staff vacancies, the team doesn’t have the capacity to realise the full public value of FOPS statistics and is likely to struggle to meet the needs of key users from DWP and OECD, as well as assure the quality of new data and deliver more data to National Accounts.

1.29 Currently the pension statistics team responds individually to user ad hoc requests for data which is time consuming and only beneficial to certain sets of users. Instead, the team should look to prioritise publishing the data that maximises value for a wide range of users. ONS should work with users to understand common themes from their requests to help in drawing up a list of FOPS developments. Working with users, the pensions statistics team should prioritise what datasets are produced and what the focus of the bulletins should be.

1.30 ONS has so far shown flexibility within its resourcing by temporarily transferring staff from the insurance company survey team to fill gaps during staff changeover, but this is not sustainable in the longer term.

1.31 Structural changes within ONS may help in providing extra resource to the pension statistics team. FSPS is one of many financial surveys that feed into ONS Financial Accounts. In response to reviews in 2014 and 2016 that highlighted a need for an improvement in ONS Financial Accounts, the pension statistics team proposes to work more closely with the Financial Sector Accounts and International Development team, to become Economic Statistics Production and Analysis, which could help to fulfil some of the pension statistics team resource requirements.

1.32 It is clear there is a mismatch between the public value available to be delivered and the resources of the team to maximise that value. ONS must ensure that there is sufficient resource in the pension statistics team to extract more value from the FSPS and deliver more data on transactions, assets and liabilities to National Accounts.

Requirement 1 – ONS needs to deliver key insights that serve the public good, such as breakdowns of the types and locations of assets that pension funds are investing in and to ensure that it can respond effectively to new user demands.

Requirement 2 – ONS should work with key stakeholders to establish and be open about a work programme for its priorities for Funded Occupation Pension Scheme statistics development.

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