Participation in pensions increased in 2013 for the first time since 2006, according to research by the Office for National Statistics (ONS).
Its 2013 Annual survey of hours and earnings: summary of pension results, found that the proportion of employees who belong to a workplace pension increased from 47% to 50% in 2013, the largest rise since records began in 1997.
The research also found:
- 85% of public sector employees and 36% of private sector employees had a workplace pension scheme in 2013.
- In the private sector, 51% of employees at large employers (5,000-plus employees) were members of a workplace pension in 2013, compared to 36% in 2012.
- In the public sector, 75% of full-time employees earning between £100 and £200 per week were members of a workplace pension in 2013, compared to 59% in 2012.
- In 2013, 23% of employees with defined contribution (DC) pension schemes received employer contributions of greater than zero and less than 4% of pensionable earnings, compared to 11% in 2012.
- The proportion of employees with DC pension schemes receiving employer contributions of more than 12% stood at 20% in 2013, compared to 33% in 2012.
- 37% of employees aged between 22 and 29 were members of a workplace pension in 2013, compared to 31% in 2012, the largest increase for any age band.
Steve Webb (pictured), minister for pensions, said: “Our reforms to pensions are working. More people are saving and this shows that, even at an early stage, automatic-enrolment is having an extraordinary impact.
“[It] has gone from strength to strength and now more than three million people have been automatically enrolled.
“Ensuring people can plan for their retirement is paramount to a strong economy.”
It is very encouraging to see the participation rate in workplace pensions is rising and nudging 50%, no doubt due to the three million workers who have been automatically enrolled into a workplace pension scheme.
It is great to see more people saving for their retirement, but it’s essential to remember that this is only half the picture and it’s worrying to see the percentage of employees who are in defined contribution (DC) schemes with an employer contribution of over 12% has almost halved.
Under the rules of automatic enrolment, from 1 October 2018, all employees must receive minimum pension contributions of 8%, with at least 3% coming from the employer. Making sure that people truly understand what constitutes an adequate contribution rate to secure a decent income in retirement will play a pivotal role in the long-term success of automatic enrolment.
As contributions edge up to 8% in the next few years it will be vital that people understand the value and necessity of increasing their contribution rates, as this will help them prioritise long-term saving over short-term spending.