Automatic enrolment  

DC pension contributions outstrip final salary for first time

DC pension contributions outstrip final salary for first time

Employee contributions into defined contribution pensions have overtaken those into defined benefit pensions for the first time, according to official data.

The latest data from the Office for National Statistics showed in 2018 employee contributions into DC schemes soared to £4bn, while DB pension contributions fell slightly to £3.2bn. 

This was in stark contrast to five years ago when employees were paying £3.6bn into DB schemes and less than £0.5bn into DC pensions. 

But while employees contributed more into DC, employers continued to pay more into DB, with £17.62bn paid in 2018 compared with £11.62bn for DC pensions. 

Steven Cameron, pensions director at Aegon, said: "The latest figures from ONS show the meteoric rise in DC pensions, fuelled by automatic enrolment and the huge growth in master trusts. 

"In 2018 for the first time employee contributions to DC outstripped those into DB pensions.

"Employers are still paying more into DB than into DC, although with the continued decline in DB in the private sector and with auto enrolment minimum contributions from employers rising from 2 per cent to 3 per cent from April 2019, we may in 2020 see DC overtake DB for employer contributions too."

The figures covered self-administered schemes which include master trusts but not GPPs offered by insurance companies, and therefore underestimate the total being paid into DC schemes.

Auto-enrolment was introduced in late 2012 and to date 10m employees have been enrolled into a workplace pension.

Minimum contributions were increased overall from 2 to 5 per cent in April 2018, and from April 2019 onwards will be increased further to 8 per cent of earnings between £6,136 and £50,000, with a minimum of 3 per cent from employers.