Steve Webb, Director of Policy at Royal London comments on today’s ONS occupational pensions statistics: There is a mix of good news and bad news in these figures. The good news is that millions more people are now saving for a pension, mainly because of firms automatically enrolling them into workplace pensions. The bad news is that, at the moment, relatively small amounts of money are going into these pensions. Contribution rates of around 4% of wages are probably less than a third of what is needed for a decent pension. It is vital that we build on the success of automatic enrolment in getting people started on pension saving by 'nudging' them to increase their savings levels to more realistic levels".
Commenting on this new, Alistair McQueen, Head of Savings & Retirement for Aviva said: “This is a great day for savers in the UK. After years of decline, the policy of automatic enrolment has re-invented pension saving. Saving for our future has now become the norm for employees in the UK. This is good news for savers and good news for the UK.
“The report however contains a serious warning. The numbers of savers is rising, but the amount we save is not keeping up. The latest figures show that the average contribution rate by an employee into the dominant “defined contribution” pension arrangements has fallen to an all-time low of just 1% of pensionable earnings. At this level of saving, most people will fail to achieve the income they desire in retirement.
“Aviva calls for the auto-enrolment minimum contributions to be increased to 12.5% by 2028.
“More savers is fantastic, but more saving is needed if we are to avoid deep disappointment in years to come.”
Commenting on the survey results Malcolm McLean, senior consultant at Barnett Waddingham says: It is very good news to see that total membership of occupational pension schemes in the UK was 39.2 million in 2016, the highest level recorded by the survey. This represents an increase of 17.1% compared with 2015 (33.5 million).
“There has also been a very substantial increase in active membership of private sector defined contribution schemes from 6.4 million in 2016 compared to 3.9 million in 2015 – a rise of 62.5%.
It is also significant that the numbers contributing to private sector occupational schemes now exceeds those in public sector schemes – 7.7 million compared to 5.7 million.
“On a less positive note it is regrettable, but not surprising, that occupational defined benefit pensions schemes continue to decline, representing less than half of total workplace pension membership, down from a high of 83% in 1997.
“Overall though the results are encouraging and confirm the success of auto-enrolment in significantly increasing the numbers saving into a pension scheme. The next big challenge is to encourage, by whatever means, greater levels of contributions to ensure more meaningful pension provision results. In 2016 for private sector defined contribution schemes the average total contribution (member plus employer) was only 4.2%, broadly in line with 2015. Going forward the minimum 8% contribution level specified for auto-enrolment is clearly inadequate and needs to increase.”
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