Pension funds in the United Kingdom (UK) – statistics & facts


The United Kingdom (UK) pension fund market is comprised of a hybrid system with UK citizens benefiting from either or both a private and public pension scheme. Public pension schemes come in the form of a state pension. The payments provided to the recipients are dependent upon each individual’s National Insurance contributions and age. Private pension schemes come in the form of workplace pensions which have been set up by individual employers, such as the BT pension Scheme (BTPS) or personal pensions typically utilized by self-employed persons. While schemes vary, pension contributions are made primarily through two structures: defined benefit and defined contribution. In a defined benefit policy, the future retirement payment to be received by the policyholder is predetermined or at least a guaranteed minimum amount. However, with a defined contribution scheme, the regular contribution (or “premium”) paid to the scheme is fixed, and the payout received by the policyholder upon retirement is dependent upon the fund’s investment performance. Individuals may also choose to combine these two pension structures, increasing their personal total pension contributions.

Asset allocation

The market value of pension plans must be effectively managed through pension funds to create additional value for the policyholder. Pension funds typically allocate the majority of assets to fixed-income and equity products, making adjustments as needed based on factors such as economic conditions and the pension recipient’s age. Pension funds have the ability to be more aggressive earlier in investing in higher-risk securities with the aim of achieving higher gains and having the time to recoup any losses endured. This is particularly true for private pension plans that are often more tailored to the policyholder. The NatWest Group Pension Fund is the second largest pension fund in the UK. This private fund manages almost 40 billion British pounds in assets allocated to bonds alone.

Pension payouts

The payout amount of a pension plan is dependent upon several factors, inclusive of the amount paid in by the policyholder, fund performance, and type. However, public pensions may also be altered by the state due to policy, budgetary, or economic conditions. The UK pension system has faced a number of increasing pressures in recent times, including rising inflation rates and a large elderly population. The UK government is working to implement a successful economic policy in order to reduce the inflation level from its recent peak in 2022. However, with almost 13 million of the UK population being over 65 years old and reliant on a state pension, the government had to increase the average weekly pension payment to keep up with the rising cost of living, adding increased pressure to the state budget.

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