Majority of employees now participating in a workplace pension

5 Jun 2019 By Francis Churchill

Experts credit auto-enrolment for record high participation, with over £90bn saved by workers last year

Almost nine in 10 UK employees were saving through a workplace pension last year, according to the latest government figures: a rise experts have largely credited to the introduction of auto-enrolment.

According to the Department for Work and Pensions (DWP), 87 per cent of workers eligible for auto-enrolment were participating in a workplace pension in 2018, saving a total of £90.4 billion over the course of the year.

This represented an increase in participation of 3 percentage points compared to 2017, and an increase of £7 billion in the amount saved when adjusted for 2018 earnings.

Today’s figures continue the trend of increasing participation rates that have largely been attributed to the introduction of auto-enrolment in 2012. Between 2008 and 2012, workplace pension participation dropped from 59 per cent to a low of 55 per cent, but since then has steadily increased to today’s high.

DWP figures say this equates to an additional eight million people now in workplace pensions, compared to 2012.

Steven Cameron, pensions director at Aegon, said today’s figures showed a particularly positive trend for small and micro employers, low earners, part-time workers and younger employees.

“This shows that auto-enrolment is making a real difference for these employees, all of whom have historically been at risk of not saving for retirement. The rise in participation for younger age bands is particularly encouraging, as it might be tempting for this group to prioritise other financial commitments over saving for retirement,” he said.

But Cameron added there had only been a small increase in the average contribution for private sector employees, despite the 2018 increase in minimum contributions, and that the shortfall compared to the public sector has risen: “It may be that the effect of this will only become apparent in next year's figures,” he said. 

Minimum auto-enrolment contributions have since increased again, going up to 8 per cent in April this year, with at least 3 per cent contributed by employers – the effects of which will not be seen until next year’s releases.

However, Helen Morrissey, pension specialist at Royal London, said she did not expect to see a drop in participation caused by the increase – pointing out that no discernible increase in opt-outs were seen when minimum contributions increased to 5 per cent in 2018.

Speaking more generally about today’s figures, Morrissey said they showed the country was “getting back into the pensions savings habit”, and crediting auto-enrolment playing an important part in that.

But, she added, “We need to build on this success to ensure groups such as part time workers and the self-employed are also participating as much as possible.”

Separately, the High Court is to begin hearing a judicial review today into the way the government increased the state pension age for women.

The Pensions Act 2010 increased the minimum age women are allowed to access their state pension from 60 to 65, bringing it in line with the age for men. Pensions ages have since increased again, with the pension age for some workers now at 68.

However, the campaign group Backto60 is arguing that the way the initial changes were introduced was unfair to women born in the 1950s, as they were not given enough time to prepare. It says the lack of warning has meant many women born in this decade are now being forced to work longer than they intended.

The group is seeking repayment of the pensions women born in the 1950s would have received if they had been able to retire at 60.

The DWP said it did not wish to comment on an ongoing review, but previously told the BBC: “The government decided more than 20 years ago that it was going to make the state pension age the same for men and women as a long-overdue move towards gender equality, and this has been clearly communicated.”

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