UK workplace pension contributions at all-time high, but worries remain

Participation in occupational pensions surged to a record high in 2016 as more than 39m Britons made moves to save for their retirement, though there remains worries that many workers will still not have enough retirement savings.

Overall membership numbers of occupational pension schemes in the UK rose to 39.2m, the Office of National Statistics revealed, which was up 17% on 2015's figure.

But even though pension experts welcomed the higher figures, they warned the average contribution rate was still below what people would likely require to collect a decent income in retirement.

Active membership in occupational pension schemes rose to 13.5m in 2016, with 7.7m in private schemes and 5.7m in public programmes.

The total number of preserved pension entitlements increased from 11.8m in 2015 to 15.4m in 2016.

Active membership in private sector defined contribution schemes was 6.4m over the period, making up a 62.5% increase on 2015 levels.

With the government looking to build upon its initial successes surrounding its programme of automatic enrolment into workplace pensions, junior pensions minister Guy Opperman said: "Saving through your workplace pension is one of the easiest and most accessible ways to put money aside for retirement. It is really encouraging news that this form of saving is now at a record high."

The average contribution rate for private sector defined contribution (DC) schemes in 2016 was 4.2%, which the ONS said was roughly comparable to figures reported in 2015, whereas the average contribution to private defined benefit (DB) programmes was 22.7% of pensionable earnings, with 5.8% of that coming from employees directly.

Tom McPhail, head of policy at Hargreaves Lansdown said, "More and more people are saving for retirement, which is great news but the data also shows how much work there is still to do. Average contribution rates will have to rise, and that isn't going to be popular; more work also needs to be done on making it easy for people to take control of their retirement savings."

TUC General Secretary Frances O’Grady acknowledged that it was "great" that automatic-enrolment was giving millions of workers a pension for the first time.

"But the quality of workplace pensions remains a big worry," she said. "Employers simply aren't contributing enough to schemes. And this means many workers will be short of savings for a decent retirement."

"The government urgently needs to set out a plan for raising contributions from companies. If it doesn’t people will see their living standards plunge when they reach old age."