Workplace pension saving on the increase

Data released by the Department for Work and Pensions on Thursday showed a record 88 per cent of eligible employees saved into a workplace pension in 2019, up from 87 per cent in 2018.

This means 19.2m people were paying into a workplace scheme last year, an increase of 2.6 per cent from 18.7m individuals in 2018.

The data also showed the total amount saved in workplace pensions in 2019 was £98.4bn, up 5.7 per cent from the £93.1bn saved in 2018.

According to the DWP, those earning between £50,000 and £60,000 show the highest participation levels, with 93 per cent of eligible employees within this earnings band paying into a workplace pension last year.

Employees aged 40 to 49 are most likely to save into a workplace scheme, whereas those aged 22 to 29 are most likely to opt out.

Worryingly, self-employed workers have seen a decline in participation rates from 21 per cent in 2009-10 to 14 per cent in 2018-19.

Minimum contribution rates under auto-enrolment started at 2 per cent of qualifying earnings, with at least 1 per cent from employers, but current levels are now 8 per cent overall with at least 3 per cent from the employer. 

Overall in 2019, contributions by employees accounted for 27 per cent of saving, with employer contributions accounting for about 64 per cent, and income tax relief on the employee contribution the remaining 10 per cent.

But Laura Stewart-Smith, workplace savings manager at Aviva, said: “Aviva believes that the minimum contribution should be increased from 8 per cent to 12 per cent of earnings by 2028, but in the meantime individuals can use online forecasting tools to better understand what type of lifestyle they will be able to afford based on their current contributions, and the impact of making any changes.”

Nathan Long, interim head of policy at Hargreaves Lansdown, said: “This latest data makes the pension story look really rosy, with participation and savings levels nudging to ever higher levels thanks to auto-enrolment into workplace pensions. 

“The fact that a third of people who are not eligible to be auto-joined are still saving shows that pensions are becoming a social norm within society. Age now plays almost no part in your likelihood to be putting money aside for your future, which is a huge leap forward.

“However, everyone is pausing for breath and awaiting the position after the Covid-19 shakedown. Quite how many of us will stick with our pension savings if friends and colleagues are losing their jobs is uncertain.” 

This article originally appeared on ftadviser.com