Individual pension saving is on the rise for the first time in six years, according to official data.
According to workplace pension data released by the Department for Work and Pensions (DWP) yesterday (5 June), pension contributions into workplace schemes increased 2.2 per cent last year, the first annual rise since 2012.
Total pension contributions per individual increased from £4,716 in 2017 to reach £4,822 in 2018.
But the data also showed the total amount saved in workplace pensions in 2018 was £90.4bn, up 8.4 per cent from the £83.4bn saved in 2017, meaning there are more people saving smaller amounts.
Aviva stated the small uptick from 2017 to 2018 (of £107 per eligible saver) was likely to be a reflection of the increase in minimum saving requirements from April 2018, from 2 per cent to 5 per cent of pensionable earnings.
This has since increased to 8 per cent of pensionable earnings in April this year, with the employee paying 5 per cent and the employer 3 per cent.
Amount saved into workplace pension schemes:
|Total saved (£bn)||73.6||76.7||78.7||81||81.3||83.4||90.4|
|Contributions per individual (£)||6,869||6,691||5,712||5,268||5,091||4,716||4,822|
Alistair McQueen, head of savings and retirement at Aviva, said: "There appears to be a worrying trend towards saving at minimum levels.
"Saving just 8 per cent of pensionable earnings will be inadequate to give many people the income in retirement to which they aspire.
"Aviva advocates that this minimum savings level be increased to at least 12 per cent over the coming decade.
"Failing to take this small step today could result in big anger among millions of savers tomorrow."
Meanwhile, the data showed that 87 per cent of eligible employees were saving into a workplace pension in 2018, up from 84 per cent in 2017. In 2012, the year auto-enrolment was introduced, it was just 55 per cent.
The largest increase in pension participation rates was among the 22 to 29 age group across both the public and the private sector.
Mr McQueen said: "Huge credit is due to the millions of savers who have been automatically enrolled into workplace pensions since 2012. Millions were asked to save, and millions have chosen to rise to the challenge.
"Particular applause must be given to the under-30s. They are often chastised as the ‘live for today’ generation, but their increase in participation has outpaced all other age groups."
Tom Selby, senior analyst at AJ Bell, said while it was positive that more people are paying into their pension pot the average value of the contributions cannot be ignored.
He said: "When you consider auto-enrolment minimum contributions are based on a band of earnings rather than your total salary packet, millions risk being short of cash in their later years unless they take action today.
"A 25 year-old earning £30,000 paying in the minimum 8 per cent total contribution could expect to have a fund worth less than £200,000 in today’s prices when they reach retirement.
"That would convert into an inflation-adjusted annuity income of about £7,000 a year – far below most people’s retirement expectations.