The average total contribution rate for occupational defined contribution (DC) pension schemes in the private sector was 4.2% of pensionable earnings for 2016, according to research by the Office for National Statistics (ONS).
Its Occupational pension schemes survey: UK, 2016, also found that for private workplace DC pension schemes, average total contributions in 2016, showed a drop in the member contribution from 1.5% in 2015 to 1%.
For private sector defined benefit (DB) pension schemes, the average total contribution rate for 2016, including career average schemes, was 22.7% of pensionable earnings, with members contributing 5.8% of their pensionable pay and employers contributing 16.9%.
In 2016, the average contribution rate for private sector career average schemes was 17.4%, with average member contribution rates recorded at 7.5% of pensionable earnings.
The figures include rates for open, closed and frozen private sector pension schemes, excluding arrangements that have less than 12 members.
Tom McPhail, head of policy at Hargreaves Lansdown, said: “More and more people are saving for retirement, which is great news but the data also shows how much work there is still to do. Average contribution rates will have to rise, and that isn't going to be popular; more work also needs to be done on making it easy for people to take control of their retirement savings.”
Chris Noon, partner at Hymans Robertson, added: “Auto-enrolment has clearly been a success in increasing the number of people saving for retirement. The challenge now is to ensure that we don’t see significant numbers opting out over the next couple of years as minimum contributions increase to 8% of pay in April 2019. Even if we can avoid high levels of opt-out, at 8% of pay, minimum contributions will not be sufficient to provide adequate incomes in retirement. Ideally, we need to see overall saving rates in excess of 15% of pay and begin to set expectations of working lifetimes.”
