Record levels of UK employees are now members of a workplace pension scheme.
In 2017, active membership of occupational pension schemes was 15.1 million, split between the private sector (8.8 million) and the public sector (6.3 million).
The figures, released in September 2018, reflect the impact of pensions auto-enrolment which means that all UK employers must now offer their staff a pension scheme. There are 7.7m defined contribution schemes in the UK, many of which have been set up by employers as a result of auto-enrolment.
However, while more people might be paying into a pension, employer contributions dropped between 2016 and 2017. In 2016, employers were contributing an average of 3.2% of individuals’ salaries. In 2017, that figure fell to 2.1%.
The statutory requirement for employers to make higher pension contributions may be behind this decrease because minimum contribution rates for pensions auto-enrolment are on the increase for both employers and employees. In 2017, the minimum figure was 1% from employer and 1% from employees. This increased to 2% from employers and 3% from employees in 2018. Next year, the figures increase again, from 06 April 2019 to a minimum of 3% from employers and 5% from employees (total of 8%).
Many in the pension industry believe that even after the 2019 increases, we will still not be saving enough for our retirement. In July, the Pensions and Lifetime Savings Association called for minimum contributions to be increased to a total of 12%.
While there are many demands on individual’s personal finances, saving for retirement should be a vital part of everyone’s long-term planning. To learn more about your employer’s pension arrangements, or to discuss your own personal pension arrangements or retirement preparations, please speak to your Brunsdon Financial Adviser.
Please note that this information is for guidance only and does not constitute personal advice. The information provided regarding automatic enrolment pension legislation is based on our understanding of current UK legislation law, tax law and HM Revenue and Customs practice (October 2018), all of which may be subject to change. Brunsdon is not responsible for the content of external web sites.