Workplace pensions rise while contributions fall

Workplace pensions rise while contributions fall

Active membership of private sector occupational pension schemes leapt from 2.8m in 2013 to 4.9m in 2014, according to latest figures from the Office for National Statistics.

The ONS claimed this was the highest number since 2000, when there were 5.8m active members of private schemes, and appeared to reflect the impact of automatic enrolment in reversing the decline.

Together with active public sector scheme members for 2014 of 5.4m, and total active scheme membership was 10.2m – the highest number since 1995’s 10.3m.

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However, figures from the ONS’s Occupational Pensions Scheme Survey 2014 show this is still well below 1967 – the high point for active membership of occupational pension schemes – when total 12.2m membership was made up of 8.1m private and 4.1m public sector members.

Also, despite the rise in active membership of private sector schemes over the past year, the OPSS shows average total contribution rate for private sector defined contribution schemes was 4.7 per cent in 2014, down from 9.1 per cent in 2013.

Within the private sector split between defined benefits and DC schemes, the latter had been relatively static since 2006 at 1m active members, but rose to 3.1m for 2014. Meanwhile, active membership of DB schemes remained at 1.6m for 2014.

Key Figures

Average total contribution rate for DB schemes in 2014 was 20.9 per cent of pensionable earnings.

This worked out at 5.2 per cent for members and 15.8 per cent from employers.

For DC schemes the average total contribution rate was 4.7 per cent – 1.8 per cent from members and 2.9 per cent from employers.

There were 9.6m pensions in payment and 10.6m deferred pension entitlements.

Source: OPPS

Samantha Seaton, chief executive for financial forecaster eValue, said: “Auto-enrolment has been a roaring success for the majority but it has meant a minority has taken their eye off the ball.

“While it has tackled inertia of those that were not saving, it may have inadvertently created complacency among people who have savings in place, resulting in a decrease in personal contributions.”

Adviser view

Patrick Connolly of Bath-based certified financial planner Chase de Vere, said: “The ONS figures are no surprise at all. And we can expect active scheme membership to continue rising until 2018 because of the impact of auto-enrolment.

“But the contribution levels are no surprise, either, because of the number of people being taken into schemes without really understanding the level of contribution required to get them what they might want as an income in retirement. The next step in pensions is to get them to understand this properly.”