New data published by the Office for National Statistics (ONS) has revealed that the number of UK employees participating in workplace pensions has reached a record high.
The statistics reveal that the proportion of employees who contribute to a workplace pension has increased by almost 25% since the introduction of auto enrollment in 2012. Now, 73% of UK employees have a workplace pension, up from less than 47% in 2012, representing almost ten million people joining schemes.
While this news is undoubtedly positive, contribution levels have stayed close to the minimum levels required. In 2017, around 45% of private sector employees with defined contribution pension schemes were contributing less than 1% of their pensionable earnings, while just one in three employees was contributing 3% or more. This could potentially leave savers a tougher retirement that they envisage
Nigel Peaple, deputy director for defined contribution, lifetime savings and research at the Pensions and Lifetime Savings Association, points out: "While the government's phased increases will see minimum contributions rise to 8% by 2019, there is a still a risk that this will not be enough to allow savers to live comfortably in retirement. We believe the minimum level needs to increase to 12% of salary over the course of the 2020s if retirees are to be financially secure."
Steve Webb, director of policy at Royal London, agrees: A combined contribution rate of 8% between worker and firm is simply not good enough for most people. The single most important thing that the government could do would be to ensure that when people get a pay rise they automatically increase their contribution rate unless they actively opt out. We know that this approach works in the US and it is time to do the same in the UK if we are to avoid a generation of workers who will simply be unable to afford to retire."