Almost half (48%) of UK employees were members of an employer-sponsored pension scheme in 2011, falling below 50% for the first time since 1997, according to figures by the Office of National Statistics (ONS).
The figures, which are part of the update to Pension Trends, chapter, 6, 7 and 8, also showed that there were 8.3 million active members of workplace pension schemes in the UK in 2010. Of this figure, three million were in the private sector and 5.3 million were in the public sector.
The report also found:
- In 2010/11, 35% of UK workers were contributing to private pension schemes, 37% of who are men and 33% are women.
- In 2010/11, there were 7.4 million active members of defined benefit (DB) schemes and 6.9 million contributing to defined contribution (DC) pension schemes.
- In 2010, the average employee in a private sector DB pension scheme contributed 5.1% of salary, compared with 2.7% for employees in DC pension schemes.
- In 2010, the average employer contribution rate for private sector DB pension schemes was 15.8%, compared with 6.2% in DC pension schemes.
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What’s wrong with this picture?
According to the Gambling Commission, 73% of UK adults indulge in gambling (though for many, this is just buying a National Lottery ticket).
By contrast, the UK’s pension provision is still in free-fall, with membership of employer-sponsored pension schemes having fallen to 48% of employees, the first time it has dropped below 50%.
Looking beyond employees, in 2011/12 just 35% of all people aged between 16 and 64 were contributing to private pensions.
Average contributions to DC pensions are just 8.9% of earnings, which is not enough to buy a decent retirement income. Worryingly, there are signs that government policy now seems to be to do everything possible to discourage investors from taking any interest in how much they are saving, how long they are saving for or how they will get their retirement income paid out at the end. The consequence of this is likely to be millions of people sleepwalking towards an inadequate retirement income.
It is absolutely vital to focus on how much people should be saving if they are to hit their retirement income target. Anyone who is saving less than 10% to 15% of their earnings into a retirement plan is unlikely to be saving enough.
Automatic enrolment will bring around ten million new people into pension saving, more than quadrupling the number of those benefitting from an employer-sponsored scheme.
The national employment savings trust (Nest) has been designed specifically for these new savers. We are proud to be playing an important part in the transformation of Britain’s pensions landscape and helping put an end to the unrelenting decline in retirement savings of recent decades.
Today’s ONS figures on people and their pension scheme membership clearly show that the number of people saving for their retirement is falling. It’s not just the number of people in workplace schemes that is decreasing – those making private provision have fallen too.
This is why the introduction of auto-enrolment into workplace pension schemes is such an important opportunity to change the tide when it comes to pension savings. Few people would be comfortable living only on the state pension when they retire, which is why it is so important to save privately, too.
From 1 July, the UK’s largest employers could auto-enrol eligible employees, and from 1 October, the obligation to do so will start to fall upon employers of all sizes. Auto-enrolment has been a long time in the making, and it’s now imperative that employers, providers and advisers focus on making it a success.