You are here: Home - Retirement - Retirement planning - News -

90% of workers are saving into a workplace pension

Written by:
Brits saved £90.4bn in workplace pensions last year - up £7bn from 2017, government figures show.

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.

Self-employed abandoned

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.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Yorkshire BS launches 7% savings account – but there’s a catch

A regular cash savings account has been launched by Yorkshire Building Society paying 7% on a maximum of £500...
Yorkshire BS launches 7% savings account – but there’s a catch

Pension Awareness Week: Almost half of over 55s heading into retirement unaware of pension pot amount

Almost half of over 55s do not know how much money is saved in their pension pot, research reveals.
Pension Awareness Week: Almost half of over 55s heading into retirement unaware of pension pot amount

Big pensions shake-up will add £500 a year to retirement pots

Pension auto-enrolment will be extended to younger workers and the minimum earnings for contributions will be...
Big pensions shake-up will add £500 a year to retirement pots

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week