More people are now saving towards retirement through a workplace pension than ever before, according to the latest figures.
The Office for National Statistics has revealed total membership of occupational pensions schemes in the UK reached 39.2m people in 2016, a 17 per cent increase on the previous year when membership was at 33.5m.
The Department for Work and Pensions (DWP) confirmed the latest figures showed more than 8.5m more people have been saving into a workplace pension scheme due to automatic enrolment, which was launched by the government in 2012.
It said that via automatic enrolment, nearly 80 per cent of eligible people, which is those aged between 22 and state retirement age, earning £10,000 or more, are now saving into a workplace pension scheme.
While scheme membership has risen, the average amount being saved into a pension remained fairly flat.
The average total contribution rate for a defined contribution pension is 4.2 per cent, while the average total contribution rate for a defined benefit scheme is 22.7 per cent.
Guy Opperman, minister for pensions and financial inclusion, called the latest figures “encouraging”.
He said: “Saving through your workplace pension is one of the easiest and most accessible ways to put money aside for retirement.
“But our work here is far from done and we’re currently reviewing automatic enrolment so we can continue to build upon its success and encourage as many people as possible to save into a workplace pension.”
Neil Adams, head of pensions at Drewberry, welcomed the increased pension uptake, but flagged concern that auto-enrolment could breed complacency.
He pointed out many people are only paying in the minimum required by the scheme and, even when this rises in the future, such contributions could still be too low to fund a comfortable retirement.
“Yet because they've been auto-enrolled, many may sleepwalk into retirement with a false sense of security thinking they're saving enough when this may not be the case," Mr Adams added.
Research by Now: Pensions has warned of this being a problem among workplace savers, who might be saving into a workplace pension in the belief it will provide enough money to fund their retirement.
Adrian Boulding, director of policy at Now: Pensions said: “It’s just not realistic to think that contributions of £400 a year will lead to retirement pots averaging £150,000.”
“For the majority of auto-enrolled savers, the reality is that minimum contributions won’t be sufficient for a comfortable or secure retirement.”
But Ross Andrews, director of fixed rate bond provider Minerva Lending, said auto-enrolment was having the “desired effect” and would help defuse the pensions time bomb in the UK.
“The country is getting older and if we aren’t saving, the strain on the public purse could become overwhelming in the coming years,” he said.
"The fact that the employment market is as strong as it is will also be a factor in the rise in active membership. More people in jobs means more people paying into pensions.”
eleanor.duncan@ft.com
