- Number of private sector employers putting more than 7% of pay into a pension doubles from 744,000 in 2011 to 1.6 million in 2018
- Challenges remain, however, as majority of savers still contribute less than 3% and median workplace pension savings drop to just £71,000 for 55-64 year olds
- Equiniti supports proposals to lower the age of auto-enrolment with benefits increasingly apparent
Analysis from Equiniti, one of the largest providers of outsourced pension administration in the UK, finds that the number of pension savers putting more than 7% of their pensionable pay into a workplace scheme has doubled from 744,000 to 1.6 million between 2011 and 2018.
The statistics from the DWP1 demonstrate that changing behavioural attitudes towards pension saving is having a knock-on effect at the higher end of the scale rather than just funnelling lower earning workers into pensions.
There is also growing evidence that minimum contribution increases are starting to make a tangible difference to the consumer outcomes. In 2017-18, more than a third (35%) of eligible employees saw their employer contributions increase, the equivalent of just under 3 million people, marking the highest proportion on record as the total minimum contribution from worker and employer grew to 5% in April 2018.
However, it is important to note that the majority of savers are still not contributing enough to their pension with around 7 million still putting away less than 3% of their pay. This accounts for 54% of all employees eligible for a workplace pension in the private sector. Assuming a single pensioner is receiving the full new State Pension of £8,767, they would still need an annual ‘top-up’ of more than £10,000 to meet the PLSA’s suggested moderate income standard of £20,2002.
Previous research from Equiniti found that median workplace pension savings for 55-64 year-olds have fallen from £106,000 to £71,000 between 2014-16 and 2016-183 however it is hoped that these improving contribution rates will see future cohorts build up more adequate retirement savings to fund their later lives.
Duncan Watson, CEO of Equiniti’s pension business, believes the figures are proof of the continued success of auto-enrolment and is confident that further legislation will bring further benefits.
“Improving the saving habits of a nation was not going to be an overnight process, but auto-enrolment has caused a fundamental shift in how we think about pensions. Millions more people are now putting money towards their retirement and it is brilliant that the rise of contribution rates has not materially impacted the number of opt-outs.
“The new challenge is ensuring that people are saving adequately to fund their increasingly long lives with the PLSA’s income standards providing a good benchmark for the level of income required to live comfortably in retirement. With more than double the number of people contributing more than 7% of their pensionable pay it feels like we are now moving in the right direction.
“However, there is still valuable progress to be made. The proposals to lower the minimum age of auto-enrolment from 22 to 18 would be another positive step in getting those who move straight into work to start saving and begin building up a pot for their retirement.”
ENDS
For more information about Equiniti:
Temple Bar Advisory
Alex Child-Villiers / William Barker / Sam Livingstone / Alasdair Todd
Tel: +44 (0)20 7975 1415
Email: equiniti@templebaradvisory.com
Research
- DWP Automatic evaluation report 2019,
- PLSA Retirement Living Standards,
- “Workplace pension savings plummet for those entering retirement”,
About Equiniti Group
Equiniti Group plc, an international technology-led services and payments specialist, provides non-discretionary payment and administration services to some of the world’s best-known brands and UK’s largest public-sector organisations.
It is the UK’s leading provider of share registration, employee share plans, and associated investor services, and also has market leading positions in pension administration and software, and employee benefit schemes.
EQ Paymaster is one of the leading providers of Pension Administration in the UK and traces its heritage back to 1836, when the Office of the Paymaster General was founded to make payments to veterans. We still continue to pay veterans their pension today. From these roots we have grown into a pension business with over 1,500 staff serving nine million pension scheme members for leading UK private sector businesses and large public sector organisations. In 2019 we paid over £15 billion to over 4.2 million pensioners and annuitants in the UK and 180 other countries globally.
Our vision of the future is built on investing in our technology, our people and our processes. We are a technology and administration specialist – we provide the technology needed by pension schemes to operate themselves and we use that same technology to deliver outstanding service outcomes to our own administration clients. This is our sole focus and it sets us apart from our peers.