New data from the ONS on occupational pension membership shows:
• Record numbers enrolled in occupational pension schemes
• Employer contributions fall from 3.2% to 2.1%
Laura Suter, personal finance analyst at investment platform AJ Bell, comments:
“The impact of auto-enrolment continues to be seen across the pensions industry, with a record number of people now being members of work pension schemes. In 2017 there were 41.1m members, compared to 39.2m in 2016, and 15.1m active members, compared to 13.5m in 2016. This largely reflects the fact that auto-enrolment opt-outs have been low, at around 9% in 2017, albeit we are still at low contribution levels.
“However, the amount that employers and employees are putting into pensions has fallen in the past year. Some of this will be due to lower auto-enrolment contributions limits dragging down the average, but some is also due to employers reducing their contributions to auto-enrolment minimums, from previously more generous schemes.
“The total amounts contributed, so employer and employee, has fallen from 4.2% in 2016 to 3.4% in 2017, and within this the average contribution from employers fell from 3.2% in 2016 to 2.1% in 2017. Many workers will have seen a double hit as a result of auto-enrolment, with one in 10 employers holding back pay rises to absorb the costs of implementing the pension changes.*
“The figures are even more alarming when compared to the rates for defined-benefit schemes, where the average total contribution rate was 25.2% for both employers and employees, of which 19.2% was from employers.
“However, these rates will rise when auto-enrolment rates automatically go up to 8% of earnings in April next year.”
*Based on research from DWP, published in June: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/717607/employers-pension-provision-survey-2017.pdf
