Membership of occupational pension schemes in the UK stood at 39.2 million in 2016, a 17% increase compared to 2015, according to the Office for National Statistics (ONS).

Between 2015 and 2016, active (employee) members increased from 11.1 million to 13.5 million; members with preserved pension entitlements (no longer contributing but have accrued rights) increased from 11.8 million to 15.4 million and pensioner members (those receiving pension payments) decreased from 10.6 million to 10.4 million.

The rise in membership is likely to be due to auto-enrolment which is now in its fifth year.

However, the figures also show that the contribution rates for defined contribution (DC) pension, including employer additions was 4.2%

‘Woefully inadequate’

Steve Webb, director of policy at Royal London, said: “There is a mix of good and bad news in these figures. The good news is that millions more people are now saving for a pension, mainly because of firms automatically enrolling them into workplace pensions.

“The bad news is that, at the moment, relatively small amounts of money are going into these pensions. Contribution rates of around 4% of wages are probably less than a third of what is needed for a decent pension. It is vital that we build on the success of auto-enrolment in getting people started on pension saving by ‘nudging’ them to increase their savings levels to more realistic levels”.

Tom Selby, senior analyst at AJ Bell, said: “The government’s auto-enrolment programme was always likely to boost the volume of people saving in pensions. Increasing the number of people saving is only part of the challenge, however.

“The average total contribution rate in occupation DC – at just 4.2% of pensionable salary – is woefully inadequate. It’s particularly worrying that member contributions dropped from 1.5% in 2015 to 1% in 2016.  Even with 40 years of savings on an average UK salary that is going to get you a pension pot of around £125,000, a healthy amount but nowhere near enough to provide a decent income for 30 years of retirement.”

See YourMoney.com’s Not auto-enrolled yet? Five things you need to know for more information on the workplace pension scheme.