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Record number save in pension schemes but ‘more work needed’

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
22/09/2016

A record number of people are saving into occupational pension schemes, official figures reveal, but providers warn there’s still much more work to do to fix the industry.

Figures published today by the Office for National Statistics (ONS) estimate there were 33.5 million members of occupational pension schemes in the UK in 2015.

This is the highest level recorded, representing a 10% increase from the 30.4 million figure in the previous year.

The numbers are broken down into 11.1 million active employee members contributing to a workplace scheme (excluding group personal pensions), driven largely by the introduction of auto-enrolment.

In 2015, there were an estimated 10.6 million pensioners receiving pension payments and 11.8 million members, who although weren’t actively contributing to a scheme, will receive entitlements to the money at normal pension age.

Contribution levels for private sector defined contribution (DC) schemes remained largely similar to those in 2014, at 4% – with a 1.5% and 2.5% employee and employer rate respectively, while private sector defined benefit scheme rates were higher – 5% for members and an average of 16.2% for employers (21.2% in total).

The self-employed are still left behind

Despite the record numbers, Hargreaves Lansdown, says there are still two big problems that need to be addressed.

Tom McPhail, head of retirement policy, said: “The good news is that overall pension membership is on the rise thanks to auto-enrolment, but there are two big problems here: Firstly, many millions, in particular the growing legions of self-employed are still not in a pension and are being left behind; and secondly contribution rates are a long way short of adequate. There is a great deal more work for the government, employers, individuals and the pensions industry to do before the problem is anywhere near fixed.”

He added that one answer is to increase the levels of private sector DC scheme contributions, however, he acknowledges that “this will inevitably cause financial pressures on both employers and employees at a time when they are trying to contend with spending constraints, and the uncertainty of Brexit.”

This view is shared by Alistair McQueen, saving and retirement manager at Aviva, who said a shift in focus is now needed on higher levels of contributions from scheme members.

He said: “There is a lot to be celebrated in today’s pension figures. Saving in a workplace pension is now typical behaviour in the UK. If a full-time employee is not active in a workplace pension they are in the minority.

“There is however no room for complacency. Contributions today in defined contribution pensions are below the level required from 2018 [minimum 5%], and the generous defined benefit pensions in the private sector appear to be in terminal decline. While higher levels of participation represent a big step in the right direction, attention must also focus on the adequacy of savings among the millions who are now contributing.”