Record numbers paying into their pension pot...but it’s still not enough
A RECORD number of workers are saving with private pension schemes for their old age, official statistics revealed yesterday.
Total membership of occupational schemes in Britain was 39.2 million last year – up from 33.5 million in 2015 and 30.4 million in 2014 – and the highest since records began in 1953.
The increase is down to the success of the Government’s new pension saving policy of “auto-enrolment” which has directed 8.5 million people into a workplace pension scheme. Nearly 80 per cent are now saving.
But some pension experts warned that many workers were not saving enough for a comfortable retirement.
Alistair McQueen, head of savings and retirement for insurance giant Aviva, explained: “The number 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 ‘defined contribution’ pension arrangements has fallen to an all-time low of one per cent of pensionable earnings.
“At this level most people will fail to achieve the income they desire in retirement.
“Aviva is calling for the autoenrolment minimum contribution to be increased to 12.5 per cent by 2028.”
Tom Selby, senior analyst at AJ Bell, said: “The average total contribution rate in defined contribution schemes – just 4.2 per cent of pensionable salary – is woefully inadequate. Even with 40 years of savings on an average salary that is going to get you a pension pot of around £125,000, nowhere near enough to provide a decent income.”
Automatic enrolment was launched in 2012 and requires employers to enrol all those aged between 22 and the State Pension age, earning £10,000 per year or more, in to a workplace pension.
By 2018 when the roll-out is complete, it is expected that up to 11 million people will be newly saving or saving more.
Minister for Pensions and Financial Inclusion Guy Opperman said: “We’re currently reviewing automatic enrolment so that we can continue to build upon its success.”