Table of Contents
Introduction
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- Abbreviations
Executive Summary
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- The market
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- Figure 1: Forecast of new insurer-administered occupational pension premiums, 2006-16
- Figure 2: Forecast of new GPP premiums, 2006-16
- Scheme membership
- Market factors
- Auto-enrolment and pension reform
- Quantitative easing and economic woes
- Regulation and Solvency II
- Companies, products and innovations
- Innovations
- Largest private sector schemes run by FTSE 100 companies
- The consumer
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- Figure 3: Product ownership, March 2012
- A lack of awareness about pension options
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- Figure 4: Employer pension scheme membership options, March 2012
- Pensions are valued – but there are worries about security
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- Figure 5: Attitudes towards pensions, March 2012
- People place real value on a company pension
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- Figure 6: Agreement with the statement ‘I really value my employer’s contribution to my pension scheme’, March 2012
- What we think
Issues in the Market
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- Is pension complexity encouraging people to switch to ISAs for retirement savings?
- Auto-enrolment – who are the winners and losers?
- Could it be time to find other retirement funding strategies?
- Does auto-enrolment stand any chance of defusing the pension time bomb?
- Will quantitative easing force companies to find millions to top up pension funds?
- Can we learn lessons from the Dutch and promote ‘Defined Ambition’ schemes?
Future Opportunities
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- How employers and insurers can hand retirement planning back to consumers
- Providers can capitalise on desire for pensions by making them more flexible
- The UK government will continue to work alongside pension providers in an attempt to diffuse the pensions time bomb
Internal Market Environment
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- Key points
- Understanding company pensions
- Auto-enrolment will means pensions for all
- Company benefits package – pensions
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- Figure 7: Proportion of employers offering particular benefits as core, 2012
- How employers will deal with auto-enrolment costs
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- Figure 8: How employers plan to deal with increased costs related to auto-enrolment, 2012
- Concerns over occupational pension transfers
- Solvency II impact on DB pensions
- The importance of the pensions world keeping up with technology
- Regulatory rethink
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- Figure 9: Weighted average contribution rates to private sector occupational pensions schemes, by size and benefit structure and contributor, 2010
- Quantitative easing’s impact on pensions
- Concerns over NEST restrictions
- Will the uptake for auto-enrolment be as expected?
Broader Market Environment
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- Key points
- Economic outlook remains gloomy – not good news for pensions
- Pension upset persists throughout the country
- Low BoE base rate makes saving unattractive
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- Figure 10: Average annual changes in the Bank of England base rate, CPI and RPI, UK, October 2007-February 2012
- Stability in the stock market adds confidence to the pensions market
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- Figure 11: FTSE 100 and FTSE All-Share, daily index movements, 2004-12
- Living longer is only good news if you’ve got adequate retirement provisions in place
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- Figure 12: Cohort life expectancy at age 60, by gender, 1981-2059
- Occupational pensions contribute 25% to average pensioner incomes
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- Figure 13: Average pensioner income, by source, at current prices, 2009/10
Competitive Context
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- Key points
- Alternative retirement funding strategies
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- Figure 14: Summary of retirement funding strategies, 2012
- Most common types of workplace pension
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- Figure 15: Framework for workplace pensions, 2012
- Administrative costs for auto-enrolment
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- Figure 16: Administrative costs of auto-enrolment, October 2010
- Salary sacrifice
- GPPs continue to grow in popularity
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- Figure 17: Group personal pension business in force, 2006-10
SWOT Analysis
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- Figure 18: SWOT analysis
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Who’s Innovating?
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- Key points
- Developments in risk transfer – longevity swaps
- Capital markets and longevity risk
- Corporate platforms
- Smartphone pensions apps
Occupational Scheme Membership
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- Key points
- Different stories for private and public sector occupational pension scheme membership
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- Figure 19: Number of active occupational pension scheme members, pensions in payment and preserved entitlements – UK, by sector, 2006-10
- Note on double counting
- Number of private sector occupational scheme members decreasing
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- Figure 20: Number of active private sector occupational scheme members – UK, 1995-2010
- Public sector has three times as many open DB schemes as the private sector
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- Figure 21: Number of active members of occupational pension schemes – UK, by status, size, sector and benefit structure, 2010
- Auto-enrolment will see private sector membership levels shoot up amongst smaller companies
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- Figure 22: Number of active members of private sector occupational schemes (open and closed) – UK, by size and benefit structure, 2010
- Two thirds of active members were contracted out in 2010
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- Figure 23: Number of active members of private sector occupational schemes, by contracting out status, 2007-10
- Significant contribution rate increases were seen for private sector DB pensions in 2010
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- Figure 24: Proportion of active members of private sector DB occupational pension schemes, by changes made to the scheme since 6 April of previous year, 2007-10
- Contribution rates also saw a marked increase for DC pensions in 2010
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- Figure 25: Proportion of active members of private sector DC occupational pension schemes, by changes made to the scheme since 6 April of previous year, 2007-10
Market Size and Forecast
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- Key points
- Insurer-administered occupational pension market
- Growth across new insurer-administered occupational pension business
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- Figure 26: New insurer-administered occupational pension business (volume and value), 2005-11
- Regular and single DC premiums on the rise as companies prepare for auto-enrolment
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- Figure 27: New insurer-administered occupational pension premiums, by sub-sector, 2005-11
- DC market size measured for the first time
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- Figure 28: Value of total liabilities of workplace pension schemes provided or facilitated by private sector employers, 2010
- DC pension membership and premium value increases
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- Figure 29: Insurer-administered occupational pension business in force, 2006-10
- Risk transfer market
- Growth in the bulk buyout sector driven by uncertainty in DB schemes
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- Figure 30: In-force bulk buyout business, 2007-11
- Affordability and flexibility drive new bulk buyout sales
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- Figure 31: New pension bulk buyout sales (volume and value), 2007-11
- A positive future for insurer-administered schemes
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- Figure 32: Forecast of new insurer-administered occupational pension premiums, 2006-16
- Figure 33: Value sales for new insurer-administered occupational pensions premium value, 2006-16
- Group personal pension market
- Big employer entry into the GPP market is driving growth
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- Figure 34: New GPP business, 2005-11
- Figure 35: Forecast of new GP premiums, 2006-16
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- Figure 36: Value sales for GPP premiums, 2006-16
- Forecast methodology
Supply Structure and Market Share
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- Key points
- Supply structure of workplace pensions
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- Figure 37: The main participants in the occupational pensions market, 2012
- UK’s top employers and private sector pensions
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- Figure 38: The top 20 listed companies, by market capitalisation, May 2011
- Insurance companies
- Insurer-administer sector continues to be headed by Standard Life
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- Figure 39: Top 20 providers of insurance-administered occupational pension schemes, by GWP, 2009 and 2010
- Individual pensions sector
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- Figure 40: Ranking of individual pension providers – UK, by GWP relating to total individual pension and income drawdown business, 2009 and 2010
- Investment management
- Pensions IFAs
- Benefit consultants
- Other professional services
Companies and Products
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- Figure 41: Key financial data for Standard Life UK (long-term savings and investment business), 2010 and 2011
- Prudential
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- Figure 42: Key financial data for Prudential, 2010 and 2011
- AEGON
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- Figure 43: Key Financial data for AEGON, income by product segment 2009-11
- Legal & General
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- Figure 44: Key financial data for Legal & General (Savings Business), 2009-11
- Lloyds Banking Group
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- Figure 45: Key financial data for Lloyds Banking Group UK life and pensions business, present value of new business premiums, 2010 and 2011
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Brand Communication and Promotion
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- Key points
- Pension providers and advisers decrease their adspend
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- Figure 46: Advertising expenditure on pension products, by product category, 2008-11
- Aviva is the top pension product advertiser
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- Figure 47: Top six advertisers of pension products, 2008-11
- Press advertising is the most popular medium for pensions
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- Figure 48: Advertising expenditure on pension products, by media type, 2008-11
Channels to Market
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- Key points
- Group pension business is usually sold with advice
- IFAs dominate the distribution of regular-premium insurance-administered occupational pensions
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- Figure 49: Distribution breakdown of new insurance-administered occupational pension business – regular premium, 2004-11
- Single-premium business has a higher proportion of non-intermediated sales
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- Figure 50: Distribution breakdown of new insurance-administered occupational pension business – single premium, 2004-11
- IFAs control more than 90% of the GPP market
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- Figure 51: Distribution breakdown of new insurance-administered GPP business – regular and single premium, 2004-11
Pension Ownership and Membership
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- Key points
- Some 41% of people in the UK own a pension
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- Figure 52: Savings and investment product ownership, March 2012
- A lack of appreciation for employer contributions?
- The pensions gap widens for part-time workers
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- Figure 53: Pension ownership, by employment status, March 2012
- Majority of people do not have access to a pension through their employer
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- Figure 54: Pension scheme membership options from employer, March 2012
- Only a quarter of full-time workers have the option of a DC scheme with employer contributions
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- Figure 55: Pension scheme membership options, by Employment status
- Women less likely to have access to a pension scheme through employer
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- Figure 56: Pension scheme membership options from employer, by gender, March 2012
- Younger people more likely to be unsure of the pension options
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- Figure 57: Pension scheme membership options from employer, by age, March 2012
- Those unsure about their pension provisions show lack of savings and investment ownership
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- Figure 58: Savings and investment product ownership, by pension scheme membership options from employer, March 2012
- Just over a fifth of occupational scheme members dabble in stockmarket investments
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- Figure 59: Savings and investment product ownership, by asset class held, March 2012
Attitudes towards Occupational and Group Pensions
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- Key points
- Pensions are important to employees but many are concerned about their long-term security
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- Figure 60: Attitudes towards occupational and group pensions, March 2012
- 47% of the self-employed believe that pension alternatives are a better way to save for retirement
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- Figure 61: There are better ways to save for retirement, by Employment status
- Nearly half of full-time workers want a good pension scheme from a prospective new employer
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- Figure 62: If I were looking for a new job I would look for one with a good pension scheme, by Employment status
- Full-time workers are more likely than average to want a pay rise over employer pension contributions
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- Figure 63: I’d rather have a pay rise than pension contributions, by Employment status
- DB pension owners less concerned about the security of their pension
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- Figure 64: Savings and investment product ownership, by agreement with statement ‘I am concerned about the security of my pension’, March 2012
- DB owners recognise the value of their pension
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- Figure 65: Pension scheme membership options from employer, by agreement with the statement ‘There are better ways to save for retirement than in a pension’, March 2012
- People who believe there are better ways to save for retirement don’t back it up with product ownership
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- Figure 66: Savings and investment product ownership, by agreement with statement ‘There are better ways to save for retirement than in a pension’, March 2012
- 25-34-year-olds tend to be the ones who believe that there are better ways to save than with a pension
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- Figure 67: Agreement with statement ‘There are better ways to save for retirement than in a pension’, by age, March 2012
- Those with no current access to a pension through their employer would not value one when moving jobs
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- Figure 68: Pension scheme membership options from employer, by agreement with the statement ‘If I were looking for a new job I would look for one with a good pension scheme’, March 2012
- Those with an employer pension scheme are less concerned about the security of their pension
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- Figure 69: Pension scheme membership options from employer, by agreement with the statement ‘I am concerned about the security of my pension’, March 2012
- People who don’t currently have a pension through their employer would rather get a pay rise then a pension
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- Figure 70: Pension scheme membership options from employer, by agreement with the statement ‘I'd rather my employer gave me a pay rise rather than contribute to a pension scheme on my behalf’, March 2012
Occupational and Group Pension Activity
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- Key points
- Alarming number of people are unsure about what their employer offers in terms of pensions
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- Figure 71: Occupational or company pension activity, March 2012
- 17% of full-time employees believe that pension schemes differ according to seniority
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- Figure 72: My employer offers a better pension scheme to more senior employees, by employment status
- Final salary schemes closed to 17% of full-time employees
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- Figure 73: My employer has closed its final salary scheme to new entrants, by employment status
- Nearly a fifth of full-time workers have access to professional financial advice at work
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- Figure 74: My employer gives me access to professional financial advice, by employment status
- People who have recently reduced or stopped pension contributions have above-average ownership of stockmarket investments
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- Figure 75: Savings and investment product ownership, by response to ‘I’ve recently stopped paying into my company pension or reduced my pension contributions’, March 2012
- Other investments gaining popularity amongst those whose companies have closed off DB schemes
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- Figure 76: Savings and investment product ownership, by response to ‘My employer has closed its final-salary pension scheme to new entrants within the last few years’, March 2012
- Savings and investment product ownership higher when people have access to financial advice through employer
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- Figure 77: Savings and investment product ownership, by response to ‘My employer gives me access to professional financial advice’, March 2012
- Companies offering financial advice are more generous with pension options
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- Figure 78: Pension scheme membership options from employer, by response to ‘My employer gives me access to professional financial advice’, March 2012
- People whose employers offer alternative retirement savings products believe that pensions are not the best way to save for retirement
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- Figure 79: Attitudes towards occupational and group pensions, by response to ‘My employer offers non-pension savings products’, March 2012
- Some 58% of people who have stopped paying into a company pension would still seek a good pension in a new job
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- Figure 80: Attitudes towards occupational and group pensions, by response to ‘I’ve recently stopped paying into my company pension or reduced my pension contributions’, March 2012
- Closing final-salary schemes makes employees worry about their pension security
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- Figure 81: Attitudes towards occupational and group pensions, by response to ‘My employer has closed its final-salary pension scheme to new entrants within the last few years’, March 2012
- People value employer contributions even in companies where there are differing levels of pension schemes
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- Figure 82: Attitudes towards occupational and group pensions, by response to ‘My employer offers a better pension scheme to more senior employees’, March 2012
Appendix – Market Size
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- Figure 83: Additional best-case/worst-case table for GPP premiums, 2009-16
- Figure 84: Additional best-case/worst-case table for new insurer-administered occupational pension premiums, 2009-16
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Appendix – Pension Ownership and Membership
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- Figure 85: Most popular savings and investment product ownership, by demographics, March 2012
- Figure 86: Next most popular savings and investment product ownership, by demographics, March 2012
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- Figure 87: Other savings and investment product ownership, by demographics, March 2012
- Figure 88: Pension scheme membership options from employer, by demographics, March 2012
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Appendix – Attitudes towards Occupational and Group Pensions
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- Figure 89: Agreement with the statements ‘There are better ways to save for retirement than in a pension’ and ‘If I were looking for a new job I would look for one with a good pension scheme’, by demographics, March 2012
- Figure 90: Agreement with the statements ‘I am concerned about the security of my pension’ and ‘I'd rather my employer gave me a pay rise rather than contribute to a pension scheme on my behalf’, by demographics, March 2012
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- Figure 91: Agreement with the statement ‘I really value my employer's contribution to my pension scheme’, by demographics, March 2012
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Appendix – Occupational and Group Pension – Behaviours
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- Figure 92: Response to ‘My employer offers non-pension savings products’, by demographics, March 2012
- Figure 93: Response to ‘My employer offers a better pension scheme to more senior employees’, by demographics, March 2012
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- Figure 94: Response to ‘I’ve recently stopped paying into my company pension or reduced my pension contributions’, by demographics, March 2012
- Figure 95: Response to ‘My employer has closed its final-salary pension scheme to new entrants within the last few years’, by demographics, March 2012
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- Figure 96: Response to ‘My employer gives me access to professional financial advice’, by demographics, March 2012
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