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  • February 2015
02

Record 59% of UK employees have pensions

Open-access content 27th February 2015

The proportion of employees with workplace pensions in 2014 was 59%, according to research.

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The latest report about pensions from the Office for National Statistics (ONS) said it was an increase from 50% in 2013 and confirmed it was the highest since the ONS started the research in 1997. 

Pensions minister Steve Webb said this was driven by automatic enrolment in the workplace. He said: "This is due in no small part to the success of automatic enrolment, which is changing the culture of pension saving in Britain. Millions more people are now saving into a workplace pension, allowing them to build a decent nest egg to enjoy in their retirement, on top of a reinvigorated new state pension."

Chris Noon, partner at Hymans Robertson said: "These figures show that, thus far, auto-enrolment seems to be working and is taking us in the right direction, which is good news. With over 90% of employees choosing not to opt-out, more people are saving for retirement."

In the report 2014 Annual Survey of Hours and Earnings: Summary of Pensions Results, defined benefit (DB) pension schemes represented less than half (49%) of total workplace pension membership in 2014, for the first time since 1997.

Noon said it was a "tipping point" for the shift from DB to defined contribution (DC) but warned automatic enrolment had not reached all SMEs. He said: "It's worth noting, however, that the process of automatically enrolling people into pensions isn't complete. There are still many SMEs who haven't been through this yet so we could see this figure increase further over the next couple of years."

The report also revealed pension membership increased in all age groups in 2014 compared with 2013, with the largest increase of 17% in the age group 22-29 (from 36% to 53%).

Noon said: "Hopefully the new pension freedoms from April will help change the perception of pensions as poor value, and encourage younger generations to view their pension pots as another means of saving - and one that offers both great tax advantages and returns, particularly if your employer matches your contributions. Essentially that's extra pay that you won't get if you don't invest in a pension."

Malcolm McLean, senior consultant at Barnett Waddingham said although pension membership increased to 59%, the contribution rate from both employees and employers had been reduced.

He worried savers would not have a comfortable retirement, saying: "These ONS figures suggest a trend which many of us feared would emerge, in that while on the surface more people are paying into a pension plan, the average amount per person being contributed is less. Will the final pension pot be nearly enough for members to retire comfortably on? I worry that it won't. 

"This all points to the need for an urgent review of the minimum contribution levels specified for auto-enrolment in 2018. If the trend continues, I fear that for many savers auto-escalation from such a low base as proposed recently by the pensions minister may not be a sufficient measure."

Auto-escalation is a concept where employees increase their contributions automatically at a future date, often in line with pay rise.

This article appeared in our February 2015 issue of The Actuary.
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