90% of workers are saving into a workplace pension
In total, 87 per cent of eligible workers contributed to a workplace pension in 2018, up from 84 per cent the previous year.
The number of people who saved in a pension in at least three of the last four years declined marginally from 74 per cent to 72 per cent. Experts say this could be down to the small number of savers who opted out of auto-enrolment when the minimum contribution level went up from 2 per cent to 5 per cent in April 2018.
Public sector pension participation remains high at 93 per cent, an increase of 5 percentage points since 2012, according to the statistics from the Department for Work & Pensions.
But the largest increases in workplace pension saving have been within the private sector, where participation has risen by 42 per cent since 2012.
Tom Selby, senior analyst at AJ Bell, said: “The impact of automatic enrolment on pension saving has been truly staggering….This figure is likely to increase still further in 2019 as the rise in minimum contributions from 5 per cent to 8 per cent of relevant earnings kicks in.”
The figures show positive trends for small and micro employers, lower earners, part-time workers and younger employees.
Steven Cameron, pensions director at Aegon, said: “This shows that auto-enrolment is making a real difference for these employees – all of whom have historically been at risk of not saving for retirement.”
Most need to save more
However, the nation continues to face challenges when it comes to saving enough for retirement – and most workers are still not contributing enough.
Selby said: “When you consider auto-enrolment, minimum contributions are based on a band of earnings rather than your total salary packet, millions risk being short of cash in their later years unless they take action today.”
Figures from AJ Bell suggest a 25-year-old earning £30,000 who is paying in the minimum 8 per cent contribution could expect a pension fund worth less than £200,000 in today’s prices when they reach retirement. That would convert into an inflation-adjusted annuity income of around £7,000, far below most people’s retirement expectations.
“The choices facing people today are simple: pay more in now, retire later or have less money to spend when you stop working,” Selby added.
It is also important to consider the millions of self-employed workers who are excluded from auto-enrolment.
Cameron said: “The self-employed workforce, unlike employees, have seen a continuous decline in participation rates and participation has fallen from 27 per cent in 2008/09 to 15 per cent in 2017/18.
“The government needs to focus their attention on this large proportion of the workforce to make pension saving more attractive or many will risk being left behind and run out of funds in retirement.”