• Over three-quarters (77%) of UK employees were members of workplace pension schemes in 2019, a new record, official ONS data reveals (https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/workplacepensions/bulletins/annualsurveyofhoursandearningspensiontables/2019provisionaland2018finalresults)
• There are now more defined contribution (DC) members than defined benefit (DB) in the UK for the first time since records began
• However, there remains a gender gap in the private sector, with more men (77%) having a workplace pension than women (69%)
• Still no answer to the self-employed savings conundrum ahead of Budget next week
Tom Selby, senior analyst at AJ Bell, comments:
“Automatic enrolment has succeeded in dramatically boosting the number of people saving into a workplace pension. This has been no mean feat, particularly as most people have chosen to continue saving for retirement even in the face of rising minimum contributions.
“The fact there are now more defined contribution scheme members than defined benefit is testimony both to the success of auto-enrolment and the continuing demise of guaranteed pensions in the private sector. While many will lament the slow death of DB, DC is the future of retirement saving in the UK and the focus needs to be on making this avenue as attractive as possible for savers.
“Women continue to lag behind men in both the amount they save for retirement and private sector workplace membership. This membership gap is likely, at least in part, due to more women earning below the auto-enrolment earnings trigger of £10,000, but nonetheless boosting the pensions of women should be a key focus of this and future Governments.
“It is also unclear what the future holds for the auto-enrolment reforms more generally. A 2017 review proposed scrapping the ‘qualifying earnings’ bands, so every pound earned receives a matched contribution, and lowering the minimum qualifying age from 22 to 18.
“At the time the Government pledged to introduce these changes by the ‘mid-2020s’, although we have heard precious little since. Employers and savers will need ample notice of such changes so they have sufficient time to prepare.
“The promise to use similar behavioural nudges to auto-enrolment among the 5 million self-employed workers, who tend to chronically under save for retirement, has also failed to deliver any practical reforms. Failing to address this growing part of the labour market risks creating another pensions crisis in the future.
“Although the current Government has other more pressing issues to address at the moment, not least the coronavirus outbreak, setting a course for the future of auto-enrolment and pension saving more generally is crucial to build on the early successes of the reforms.
“Given the importance of this point in time, a new Pensions Commission may be needed to guide genuine long-term retirement policymaking.”
