ONS data exposes ‘shocking’ pensions inequality

ONS data exposes ‘shocking’ pensions inequality
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One-10th of the UK population held more private pension wealth than the rest of the country combined between 2018 and 2020, new research has revealed.

According to the Office for National Statistics, the percentage of UK citizens saving into defined contribution pensions has surpassed those in defined benefit schemes for the first time, with 26 per cent of people paying into a DC scheme from April 2018 to March 2020, compared with 23 per cent in DB schemes.

The research showed that the percentage of those actively saving for retirement with a private pension has increased to 57 per cent from its 2012 level of 43 per cent — before the introduction of automatic-enrolment.

But it also exposed a gulf in equality on pension savings. One-10th of the population held more private pension wealth (64 per cent) than the rest of the nation combined. The median pension wealth in this top decile was £637,500. The bottom five deciles held less than 1 per cent.

“This level of inequality is quite shocking and demonstrates the need for further reform of pensions policy,” said Becky O’Connor, head of pensions and savings at Interactive Investor. 

“We quite clearly cannot generalise about ‘wealthy retirees’ or ‘the pensioner population’ when experiences are so disparate.”

A third of people expect to retire with only a state pension, while the data confirmed that the self-employed are lagging on retirement saving.

Having low income or not working was the most common reason for not paying into a pension, which was the view of 54 per cent of respondents.

Self-employed people were more likely to say they could not afford to contribute to a pension — 39 per cent compared with 26 per cent of employees. Seventeen per cent of self-employed people preferred different ways of saving, against 9 per cent of employees. 

“The cost of living increase is undoubtedly having a detrimental impact on people’s finances, and as people look to tighten their belts there is a risk that some may be tempted to dip into their savings,” said Pete Glancy, head of policy, pensions and investments at Scottish Widows. 

“Inadequate pension savings have long been a systemic problem in the UK, and without immediate action we face sleepwalking into a bigger, long-term savings crisis — one that can only be solved through boosting financial literacy, widening access to financial advice, and a solid long-term strategy from the government.”

Alex Janiaud is deputy editor at Pensions Expert