Eligible employees contributing to workplace pension pots saved a total of £90.4 billion in 2018, an increase of £7 billion on the amount saved over the previous year, according to research by the Department for Work and Pensions (DWP).
Its annual Workplace pension participation and savings trends of eligible employees official statistics: 2008 to 2018 report, published on 5 June 2019, also found that in 2018, pension contributions by employees accounted for 26% of their retirement savings, compared to 64% that was
contributed by employers. The remaining 10% is attributed to income tax relief on employees’ contributions. Overall, 87% of eligible employees participated in a workplace pension in 2018, an increase on the 84% saving into an occupational pension in 2017. Between 2012 and 2018, the number of private sector employees saving into a workplace pension has increased by 43%, and now stands at 85%.
This compares to 93% of public sector staff who participate in their workplace pension. Commentators believe this year’s figures show positive trends, particularly for small and micro employers, lower earners, those working part-time and those in younger age bands. This shows that auto-enrolment is making a real difference for these employees, all of whom have historically been at risk of not saving for retirement. The rise in participation for younger age bands is particularly encouraging. However, despite the amount people paying into retirement pots increasing for the first time in six years, and average workplace contributions outside the public sector remain too low, experts say, with most people setting aside 4% or less of their salary (with the first 3% now matched by their employer).
This is still not enough. As an example, a 25-year-old who is earning £30,000 and paying in the minimum 8% total contribution could expect to have a fund worth less than £200,000 in today’s prices when they reach retirement. That would convert into an inflation-adjusted annuity income of about £7,000 a year — far below most people’s retirement expectations.