Public sector drives workplace pension participation rise

Public sector drives workplace pension participation rise
Photographer: Jason Alden/Bloomberg

Increased public sector employment driven by the government’s coronavirus pandemic response led to a rise in workplace pension participation last year, according to fresh data from the Office for National Statistics.

Workplace pension participation in the UK rose to 79 per cent of savers in 2021 from 78 per cent in the prior year. 

In April 2021, the public sector’s participation rate stood at 91 per cent, or 22.6mn employees, compared with three-quarters enrolled within the private sector. 

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This gap was among the smallest it has been according to ONS records, with the research body attributing this to increased private sector participation over the past decade. In 2012, just 32 per cent of public sector workers were enrolled in a workplace scheme.

There was a stark split in workplace pension participation between private sector full-time employees earning £100 to £199 a week and their public sector counterparts, respectively sitting at 43 per cent and 88 per cent. 

The ONS said this was “likely influenced by AE earnings and age eligibility criterion”.

The gap between those eligible for automatic enrolment and those too young for the threshold, which stands at 22 years of age, will add more pressure to the government to lower the threshold to the age of 18 in line with its own recommendations made in a 2017 review.

Around eight in 10 eligible employees had a pension in April 2021, compared with just 20 per cent aged 16 to 21 years old.

“​​It is clear these actions would considerably boost participation among these underserved groups and give them the opportunity to save more for longer and build a more resilient retirement as a result,” said Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown. 

“Anyone who feels they can’t afford it is able to opt out, but the data overwhelmingly shows that the vast majority of people remain in their pension once they’ve been enrolled.” 

Morrissey described the government as having been “evasive” over the timeline to potential changes to auto-enrolment.

The boom in workplace saving over the past decade was particularly pronounced in the accommodation and food services sector last year.

While participation rates remain far below the average at just 51 per cent, this nevertheless represents a 46 percentage point rise since 2012.

The “participation rate will reflect the characteristics of employees in this industry relating to their age and income, affecting eligibility for AE”, the ONS said.

Alex Janiaud is deputy editor at FTAdviser's sister publication, Pensions Expert