Workplace pension membership hits new record high

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Workplace pension membership hits new record high

Almost seven out of 10 people in the UK are now members of a workplace pension because of auto-enrolment, the Office for National Statistics has revealed.

At the end of 2016, 68 per cent of the eligible population was enrolled in a workplace pension.

In 2012, just before the staged introduction of the auto-enrolment regime, the figure stood at 47 per cent.

But almost half of private sector is contributing 2 per cent or less, leading pension provider Aviva to call for mandatory auto-enrolment contribution rates to go up to 12.5 per cent.

The ONS said that, at 68 per cent, workplace pension coverage was now at its highest level since records began in 1997.

People aged 50 to 54 were most likely to be a member of a pension, at around 75 per cent. This age group was slightly more likely to have a defined benefit over a defined contribution pension.

Coverage was over 60 per cent for every age group but the under-21s and the over-65s.  

But while coverage was strong, more than 42 per cent of private employers were paying contributions of less than 2 per cent. Only 9 per cent were paying more than 7 per cent.

In the public sector, 48 per cent were paying more than 7 per cent.

This led Alistair McQueen, Aviva's head of savings and retirement, to call for the minimum contribution to be raised from 2 per cent to 12.5 per cent.

"Britain’s workers are doing their bit, but the system is letting them down. By being automatically enrolled at minimum levels of pension contributions these new savers are on track for disappointment in retirement," he said.

"The minimum levels of savings are scheduled to rise from 2 per cent today to 8 per cent in 2019, but even at that level millions will miss their retirement dreams.

"Aviva believes that minimum contributions should rise to 12.5 per cent of employee’s salaries over time."

In 1997 a large number of occupational defined benefit pension schemes were still active, and 55 per cent of people were members of schemes.

But in the ensuing 15 years membership steadily declined, before rapidly rising again in 2012.

Almost all the gains were made in private sector defined contribution schemes, as defined benefit schemes increasingly closed to new members and were replaced by less generous DC schemes.

At the end of 2016, just under 38 per cent of people were members of a workplace defined contribution scheme, up from 17 per cent in 2012.

Defined benefit membership, meanwhile, stayed steady over those four years at around 28 per cent.

DB schemes now make up just 43 per cent of the total workplace pension membership, compared with 83 per cent in 1997.

Of those with a DC pension (whether trust-based or a group personal pension), the vast majority were in the private sector. In the public sector, around 94 per cent had a DB scheme.

james.fernyhough@ft.com