Pension scheme membership at record levels
Active membership of occupational pension schemes was 17.3 million in 2018, split between the private (11 million) and public sector (6.3 million).
Active membership of private sector defined contribution occupational schemes was 9.9 million in 2018, representing an increase of 28.6 per cent on 2017 levels (7.7 million).
In 2018, for private sector defined contribution schemes, the average total (member plus employer) contribution rate was 5 per cent, rising from 3.4 per cent in 2017.
However, despite the improved take-up of pension schemes, experts warn that contributions remain too low.
Tom Selby, senior analyst at AJ Bell, said: “While getting more people to pay into a pension is clearly a big step forward, the amount people contribute needs to increase substantially if we are to avoid a retirement crisis in the coming decades.
“Plans are already afoot to scrap the earnings band at some point in the mid-2020s, meaning that minimum contributions will be calculated from the first pound someone earns. However, even this would likely leave the average earner short of achieving their retirement dreams.
“A 25-year-old earning £30,000 and saving at the minimum would end up with a pot of around £200,000 in today’s prices by age 65 – that would buy a guaranteed, inflation protected income worth about £6,500 at the moment. If you combine that with the state pension you’ll be living on around £15,000 a year.
“Savers who have retirement aspirations beyond this level shouldn’t wait for Government to sort their pensions out for them. There is no guarantee any future Prime Minister will extend minimum contribution rates much beyond the current level given the impact this could have on the wider economy in the short-term. It is therefore incumbent on individuals to take responsibility and where possible save over and above the minimum levels set out under auto-enrolment.”