PensionsOct 14 2014

Decade of decline in workplace pension saving

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The number of eligible employees participating in a workplace pension declined to 11.7m (58 per cent) in 2013 from 12.3 per cent (65 per cent) in 2003, new data published by the Department for Work and Pensions has revealed.

However, between 2012 and 2013 there was a “significant” increase of 900,000, which the DWP suggested shows the positive impact of the workplace pension reforms.

Recent pictures published by the Office for National Statistics revealed private sector defined contribution rates have fallen year-on-year from 3.1 per cent in 2012 to 2.9 per cent in 2013 for employers and 6.6 per cent in 2012 to 6.1 per cent in 2013 for employers.

The occupational pension schemes survey for 2013 revealed that total average contributions were now 9.1 per cent, compared to 9.7 per cent the previous year.

Contribution rates to defined benefit schemes, excluding deficit reduction payments, remained higher than for defined contribution schemes.

The advent of auto-enrolment did mean that the numbers contributing, or having contributions paid into a scheme, rose slightly from 7.8m in 2012 to 8.1m in 2013, for both the private and public sector.

Steve Lowe, director at Just Retirement, warned that getting more people saving through auto-enrolment is only the first step, especially in light of recent radical changes which will allow savers full access to their pension.

“An awful lot has been done to encourage saving but at the same time we need to make sure that those savings are being used well, we don’t want pensions to be become just another savings account.

“The government’s proposed guidance system will be a safety net to help people make good decisions about their pension savings, but those who do not use the guidance or seek regulated financial advice face myriad difficult decisions.”

He added that Just Retirement is “working closely” with the Treasury and the Financial Conduct Authority to ensure that there is a second line of defence to stop people falling though the net and defaulting into inappropriate financial products.

“However people choose to use their savings, it is essential they seek help to make sure they are making the right choice for them and getting the best value available.”

peter.walker@ft.com