Contributions surge 40% during decade of auto-enrolment

According to figures released by the government that coincide with the 10-year anniversary of the policy, the total annual workplace pension contribution of all eligible private sector workers rose in real terms to £62.3bn in 2021 from £41.5bn in 2012.

Per 2021 to 2022 prices, total yearly contributions into workplace pensions surged to £114.6bn in 2021 from £81.7bn in 2012.

In the public sector, the total amount saved for females was higher than the total amount saved for males in both 2012 and 2021, the government observed.

It added that there are more eligible female employees in the public sector than eligible male employees. Average savings for eligible female employees may therefore be smaller than for their male counterparts. 

In 2021, 55 per cent of eligible employees received employer contributions that were above the auto-enrolment minimum. The minimum contribution rate sits at 8 per cent, of which at least 3 per cent comes from the employer.

The increases in total annual workplace pension contributions have been replicated across every industry and all occupations, with the exception of the energy and water sector. 

Energy and water workers are, however, the most likely eligible private sector employees by industry to enjoy real terms employer contribution rates above the 2021 auto-enrolment minimum, with almost 80 per cent of those in the sector fulfilling this criteria.

“In the 10 years since its introduction, 10.7mn people have started saving for their pensions with this easy to use scheme,” pensions minister Laura Trott said.

“We have also seen a huge and much needed increase in women and young people being enrolled into a pension.”

The Department for Work and Pensions said the government is exploring abolishing the lower earnings limit for contributions and reducing the eligible age to 18, in line with the recommendations of its 2017 review — which have still yet to be implemented.

The percentage of private pension opt-outs, however, has risen to more than 10 per cent from just above 8 per cent around May 2022, in a sign that the cost of living crisis may be prompting some savers to opt out of pensions. 

The opt-out rate is defined as the proportion of new member enrolments that elect to opt out of workplace pension saving. The government acknowledged a long-term increasing trend of opt-outs since late 2020.

There has been no noticeable uptick in cessations or those who have stopped saving.

“It’s clearly a very difficult savings environment at present, with skyrocketing prices for everyday essentials such as food and fuel,” St James’s Place divisional director of retirement planning Claire Trott said. 

“Unfortunately, conditions look set to get even tougher in winter as rising energy prices kick in. Understandably, most people are focusing on coping in the short term, rather than planning for the long term. 

“However — even in difficult periods where it may be tempting to pause or stop contributions — if your circumstances allow, it’s beneficial to maintain your full workplace pension contributions.”