On the go: Employee contributions to defined contribution schemes jumped by 12 per cent after parts of the economy were restarted following the UK’s first lockdown, new data has revealed.
Data from the Office for National Statistics published on Monday revealed that employee contributions to private sector DC schemes reached £1.8bn in the third quarter of last year (July to September), up from £1.6bn in the second quarter.
Meanwhile, employer contributions to these schemes also jumped 7 per cent to £4bn in the third quarter of 2020, up from £3.7bn in the previous quarter.
According to AJ Bell, this means both employee and employer contributions have essentially returned to the levels seen before the coronavirus hit.
Tom Selby, senior analyst at AJ Bell, said: “It is hugely encouraging that, after a dip in both employee and employer pension contributions at the start of the pandemic, the amount savers are saving for retirement has quickly bounced back.
“While at this stage we do not have a clear picture of what is happening on the ground, this may in part reflect the fact that some employers who furloughed staff have chosen to top up salaries. In doing so, employees will also see their automatic enrolment pension contributions boosted.
“It is also possible the UK’s accidental savers have started to put some of the £180bn built up as a result of lower spending during the pandemic towards their retirement.”
Under auto-enrolment rules, employers must put certain staff into a workplace pension scheme and contribute towards it. These responsibilities remained, despite the fact that some employers would have had to put staff on furlough.
But there were concerns that some individuals would opt out of their workplace scheme due to fears over Covid-19 and their financial situation.
Selby said: “Anyone not paying into their workplace pension is missing out on both the upfront boost of tax relief and free money via a matched employer contribution.
“The vital importance of saving for our future — be that by building up a rainy-day fund or looking to the longer term — is one of many key lessons the UK must learn from this pandemic,” he continued.
“Workplace pensions are the foundation for most people, but to enjoy a comfortable retirement most people will need to go above and beyond this basic level. Furthermore, lots of people — including the self-employed — are not included in auto-enrolment and so need to take total responsibility for their retirement.”
This article originally appeared on ftadviser.com
