More people saving in pension, but contributions fall
There were an estimated 41.1 million members of occupational pension schemes in 2017, up from the 39.2 million reported in 2016 and 27.9 million in 2013.
According to the Office for National Statistics’ (ONS) Occupational Pension Scheme Survey: UK 2017, this is the highest level recorded.
But these positive figures mask a worrying trend of falling contributions. In 2017 for private sector defined contribution schemes, the average contribution rate from both the member and employer was 3.4% (2.1% from the employer). This is down on the 4.2% combined contributions recorded in 2016.
And before the dawn of auto-enrolment in 2012, average pension contribution rates stood at 9.7%.
But auto-enrolment has been hailed as a major driving force in the increased number of members contributing to a public sector or private pension.
Nathan Long, senior analyst at Hargreaves Lansdown, said: “The growth in pension savers shows auto-enrolment has been spectacular at changing the financial future of the nation. But the amount people are paying in needs to rise. This will automatically go up to 8% of earnings when rules change in April next year.”
Another worrying figure relates to the number of dormant pension pots, which have risen from 6.7 million in 2000, ballooning to 15.8 million last year, up from 15.4 million in 2016.
Kate Smith, head of pensions at Aegon, said: “The changing nature of the workplace means people quickly end up with multiple smaller pots, which can make it a real challenge to manage. If those with a workplace pension are to stand a chance of meeting their retirement goals, it’s essential that they are fully aware of where their various pots are invested.”
TUC general secretary, Frances O’Grady, added: “Millions of people are still a long way from getting the secure retirement income they deserve.
“It’s shocking that average employer payments into private sector defined contribution pensions are a miserly 2.1% and falling.
“Employers have to pull their weight. And the government must raise the bar by setting out a long-term path to higher minimum contributions.”
Related: See YourMoney.com’s Five things to know about auto-enrolment for more information.