Only a quarter (26%) of private sector employees are active members of their employers’ pension scheme in the UK, according to research by the Department for Work and Pensions (DWP).
The research, Employers’ pension provision survey 2011, also found that only 31% of private sector organisations currently offer pension provision for their staff.
Both figures are down from research conducted in 2007, when 31% of private sector employees were in a workplace pension scheme and 41% of private sector employers offered a pension scheme to staff.
The research also found:
- 45% of respondents without a current workplace scheme said they intend to enroll all their employees into the National employment savings trust (Nest), while 11% said they will set up their own scheme and 5% said they will use a combination of both.
- 60% of respondents who already offer some form of pension provision said they plan to keep all current members of their largest or only scheme in their existing scheme.
- 55% of respondents who intend to keep at least some employees in their largest scheme said they are likely to maintain their current contribution levels for existing members, while†34% said they are likely to increase contributions and 6% said they would reduce contributions.
Steve Webb, pensions minister, said: “Auto-enrolment into workplace pensions will start the monumental shift we need to get millions more people in Britain saving for their retirement.
“It’s a major change for business too, especially for firms that don’t currently offer pension schemes for staff, and it is good news that so many say they will use Nest.
“Nest is designed around the needs of people who are new to pension saving, with low charges, costs and easy-to-use services.
“We expect around half of all new savers to be Nest members, including many low-paid and part-time workers, women and young people, who will get a contribution from their employer for the first time.”
Read also the Employee Benefits auto-enrolment roundtable
Read more articles on pension provision and auto-enrolment
The DWP’s research has once again highlighted the gap in pension saving. This is particularly acute in private sector among those who work for smaller employers. Will auto-enrolment come to the rescue?
Millions of people are expected to start workplace saving for the first time. However, the decisions employers make on what type of pension to provide will have a big effect on how adequate the saving for retirement will be.“
For all employers, the introduction of auto-enrolment will provide a challenge and an opportunity to review their pensions strategy. Pensions play an important part in recruitment and retention, although is perhaps not as highly valued by workers as it should be in comparison to salary.
With the deadlines approaching employers should start their planning in enough time to make the right decisions and implement them in time. The survey data also shows a worrying lack of awareness among some employers.
The decline in the number of employees actively saving into a workplace pension, coupled with the fall in the numbers of private sector organisations that offer any pension provision, should concern us all. The DWP research clearly demonstrates the need for auto-enrolment, which will help millions of people in their later lives.
Nest has been designed specifically to meet the needs of our members and their employers. We want to help people across the UK understand that tomorrow is worth saving for.
We’ve already started to turn this into a reality for thousands of people whose employers have joined us ahead of auto-enrolment and we look forward to working with many more in the years to come.
These reforms are vital for the rebuilding of our pension provision, but they aren’t enough on their own and could yet end in failure. Employers and employees alike need to be actively encouraged to engage and to plan ahead. Without a concerted effort to ensure that employers and employees are well prepared and have bought in to the importance of the reforms, it could all still go horribly wrong.
With employers expecting costs to increase, and two-fifths of them planning to pass the costs on to employees in the form of reduced wage increases, there is a risk that efforts to save for the future could act as a drag on economic recovery in the short term. Many people have suffered a fall in their standard of living in recent years; auto-enrolment could extend the pain.