7. Pensions

There has been a dramatic rise in the number of people paying into workplace pensions over the past few years but the amount people contribute is sometimes very small and may not deliver the hoped-for financial security in retirement.

7.1  The last four years have seen a dramatic rise in the number of private sector workers with an active pension scheme, increasing from 2.8 million in 2013 to 8.8 million in 2017. This is largely due to the introduction of automatic enrolment into workplace pensions.

Source: Occupational Pensions Schemes Survey, UK 2017

Source: ONS (N.B. No data for defined benefits 2005)

7.2  For the first time in recent history, the number of active members of Defined Contribution schemes was higher in 2017 than the number of members of Defined Benefit schemes. The success of auto enrolment into workplace pensions is likely to be the key factor here.

7.3  Auto enrolment into workplace pensions seems to have been a great success in increasing the membership of pension schemes, particularly in the private sector. 

Data from NEST (the organisation set up by government to ensure all employers have access to a workplace pension for their employees) suggests that not all NEST members are actually contributing to their pension.  Of 6.4 million NEST members in 2018, the majority, 3.4 million, were not currently making any contributions to their pension.

7.4  The private sector is still lagging behind the public sector in terms of pensions. People in low paid jobs (between £100-200 per week) were still twice as likely to have a pension if they were in the public sector in 2017 than in the private sector (83% compared with 33%).  

7.5  Contribution rates were far higher for public sector pensions than private sector pensions in 2018. More than 90 per cent of public sector pension schemes had contribution rates of at least 5 per cent compared with fewer than 20 per cent of private sector pension schemes.

Source: ONS

7.6  From April 2019, the minimum contributions to workplace pensions increased from 5% to 8% (2% to 3% for employers and 3% to 5% for employees). This should increase the contribution rates of private sector pensions unless employees decide to opt out.