“Today’s figures yet again show the beneficial impact auto-enrolment is having on pension saving. As the number of auto-enrolees approaches 10 million, the amount saved into personal pensions is at its highest ever level of nearly £25 billion. Employers are increasingly contributing more of this amount, from 9% of total personal pension contributions in the early 1990s to 61% in 2016/17. This shows the impact of automatic enrolment along with the popularity of salary sacrifice schemes, where employees choose to exchange salary in return for pension contributions, which are then counted as employer rather than employee contributions.
“However, as the number of people saving in a pension grows, the average contribution has steadily fallen since 2012, as many employers and employees are only paying the minimum pension contributions which was 2% of a band of earnings for the years covered by the HMRC report. The impact of the increased April 2018 contribution to 5% won’t be seen in HMRC statistics for another couple of years.
“Those aged 25 to 34 have seen the biggest increase in the pension saving participation rate, almost doubling in 5 years making up 36% of total contributions, clearly demonstrating that this group is taking pension saving seriously.
“Women continue to be less likely to be saving in a personal pension than men, which is worrying. There are some positive signals in that the difference is smallest amongst those in the 25 to 34 age group.
“While pension contributions continue to rise, the amount of tax relief the government is paying out has risen by only £100m to £38.6 billion. Occupational pension schemes, continue to be the largest recipient of tax relief by far at 63% of all employer and employee pension contributions, with only 14% going to personal pension schemes. The statistics are stark for the self-employed, which only received 2% of the tax relief. This should be a sharp reminder to the government of the dramatic fall in the level of pension savings made by the self-employed, something which needs to be urgently addressed to stop future pensions apartheid between employed and self-employed.
“The tax relief received by the government on pension payments in 2016/17 was £13.5billion, the highest since these HMRC statistics began. The pension freedoms will have contributed to this as some people have rushed to cash in pension pots, often pushing them into a higher tax bracket. “
Personal Pension Statistrics - HMRC
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