Defined Contribution  

Number of old pension pots hits record high of 15.8m

Number of old pension pots hits record high of 15.8m

The number of old pension pots increased by 50 per cent since the introduction of auto-enrolment, reaching a record high of 15.8m in 2017.

These pots related to preserved pension entitlements from former employees who had accrued rights or assets in the scheme but who were no longer actively contributing.

According to data from the Office for National Statistics (ONS) published today (6 September), most of these were from workers in the private sector, accounting for 11.6m of the total.

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Alistair McQueen, head of savings and retirement at Aviva, said the data highlighted the need to make urgent progress on the pension dashboard.

The government announced this week it would let the industry take lead on project, but without a commitment to force providers to submit client data.

Mr McQueen said: "Small pension pots are a big pension problem for millions of savers.

"This week’s ministerial statement gave the green light to deliver the dashboard, ‘facilitated by government’. We need to get facilitating, now."

recent petition urging the government to deliver the pension dashboard has been signed by more than 179,000 people.

Research from 38 degrees, the campaign group hosting the petition, some 10m individuals could retire with £15,000 less if the pension dashboard is not created.

The number of preserved pension entitlements also helped drive up the number of total members in occupational pension schemes in the UK, which stood at 41.1m in 2017 which was another record, the ONS said.

Active membership has increased in five consecutive years and grew from 13.5m in 2016 to 15.1m in 2017, most starkly in the private sector, which the ONS attributed to the impact of auto-enrolment.

Private sector active membership increased from 7.7m to 8.8m between 2016 and 2017. 

Aviva also warned the figures showed private sector pension contributions were falling to minimum auto-enrolment levels.

From a contribution high of 9.7 per cent of salary in 2012, the average had more-than-halved to just 3.4 per cent in 2017 – with 1.2 per cent from the employee and 2.1 per cent from the employer.

Since the introduction of auto-enrolment in 2012 and April this year, minimum contribution was 2 per cent - 1 per cent each from the employee and employer.

From April 2018, the minimum total contribution rose to 5 per cent, and next year it will increase again to 8 per cent.

Aviva calculated that at auto-enrolment minimums, a typical 22-year-old could be on track for an income in retirement equivalent to just £6.55 per hour, which was less than the current national minimum wage of £7.83 per hour.

Mr McQueen said: "Millions of people are sleepwalking towards ‘less-than-minimum-wage’ at retirement.

"To their huge credit, millions of employees have stepped on to the automatic enrolment bus since 2012. They have done this in the belief that it will carry them to a dignified retirement.

"Based on the current system and today’s data, they are in for a huge shock. They’re on track to live on less than the minimum wage.