Statistics released by the ONS (Office for National Statistics) have confirmed that the number of people in workplace pension schemes (defined by the ONS as schemes with two or more members) hit record levels in 2014 with 30.4 million people being members of a workplace pension scheme. This is a rise of 2.5 million from the previous year and includes both contributing members and those drawing their pension.
The statistics for those people who are active members of occupational schemes (those that are contributing to it) rose by 2.1 million in 2014 to a record 10.2 million.
The rise is undoubtedly due to the impact that auto enrolment is having on workplace pensions. Under auto enrolment legislation, employers are obliged by law to auto enrol eligible employees into a workplace pension scheme before 2018. The process began in 2012 and started with the larger employers in the UK. Now we are reaching the stage where millions of smaller and micro businesses are starting to auto enrol which will see these figures rise even more, especially as only 10% of workers are choosing to opt-out of their occupational pension scheme that they have been enrolled in.
The major negative to come out of the these latest statistics from the Office for National Statistics was that in private sector workplace pension schemes (defined contribution), the total contribution rate fell from 9.1% in 2013 to 4.7% in 2014. This is probably down to those new members of occupational schemes who have been auto enrolled as the minimum contribution rate at the moment is 2% of earnings. These figures should soon begin to rise however as the Pension Regulator’s minimum contribution rates will rise from 2% to 8% on 1 October 2018.
The figures from the ONS will make happy reading for Chancellor George Osborne who was instrumental in bringing in auto enrolment as part of the Coalition. With a pensions crisis looming due to an ageing population and a lack of saving for retirement, immediate action was necessary and it looks like auto enrolment will be a big success. It won’t solve the pensions crisis, but it will be a contributing factor to helping alleviate it.