Data from the Office for National Statistics in September 2017 revealed the state of occupational (workplace) savings in the UK, to the year end December 2016.
It found a significant shift over the past decade in terms of percentage of people in defined benefit (DB) compared with defined contribution (DC) schemes, as Figure 1 shows.
INSERT IMAGE
"Over the coming years", says Sean McSweeney, corporate advice manager at Chase de Vere, "we will see the proportion of those retiring with any DB provision continuing to fall."
Auto-enrolment
In 2012, the government brought in auto-enrolment, making use of behavioural traits such as inertia to get more people into a workplace pension scheme and keep them in there.
The idea was to bring this into force in three phases, starting with the largest firms in terms of staff numbers, then the medium-sized employers and then all the small and micro-employers by 2018. It is now law for every single employer in the UK to offer access to a workplace pension.
Contributions initially started low - at 1 per cent for both employee and employer, to minimise the potential for people opting out of the workplace pension, and to get people used to the idea of saving into a pension through their workplace.
Neil Adams, head of pension planning at Drewberry Wealth, comments: "When it comes to workplace pensions, one of the most important changes has been the introduction of auto-enrolment, enrolling everyone eligible (and who hasn't opted out) into a workplace pension."
To date, according to the Department for Work and Pensions, approximately 9m people have now been brought into a workplace pension thanks to auto-enrolment.
Within the ONS's Occupational Pension Scheme survey last year, the agency found:
- Total membership of occupational pension schemes in the UK was 39.2m in 2016, the highest level recorded by the survey.
- This represented an increase of 17.1 per cent on 2015 (33.5m).
- Active membership of occupational pension schemes was 13.5m in 2016, split between the private (7.7m) and public sector (5.7m).
- Total number of preserved pension entitlements increased from 11.8m in 2015 to 15.4m in 2016.
- Active membership of private sector DC schemes was 6.4m in 2016, representing an increase of 62.5 per cent on 2015 levels (3.9m).
- In 2016, for private sector DC schemes, the average total (member plus employer) contribution rate was 4.2 per cent, broadly comparable with 2015.
Peter Glancy, head of policy development for Scottish Widows, also believes auto-enrolment is the biggest development in workplace pensions.
He explains: "It's not just that millions of people are saving into a pension for the first time but for some people, it's the first real saving of any kind.
"It has also been a catalyst for innovation and change in the industry. For example, the increase in small pots has seen us develop a simple online transfer process."
The importance of bringing more people into a form of savings habit, with the aim of ensuring they are not 100 per cent reliant on an ever-diminishing welfare state in retirement, cannot and should not be under-estimated.
