Pension: The DWP release automatic enrolment trend figures – retirement action needed

Pension savings can now be grown relatively easily with the government’s automatic enrolment system. By law, employers must now create a workplace pension scheme and enrol every eligible staff member into the scheme.

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Both the employer and employee must then pay into the pension scheme.

Yesterday, the DWP published official statistics on the scheme, with details on general savings trends from 2009 to 2019.

The numbers themselves painted a promising picture, as it was revealed that:

  • Overall 88 percent of eligible employees (19.2 million) were participating in a workplace pension in 2019, up from 87 percent in 2018
  • 70 percent of eligible employees saving into a workplace pension in 2016 were saving persistently over the following three years.
  • The annual total amount saved in 2019 by eligible savers was £98.4 billion, an increase of £5.3 billion on the total amount saved in 2018 in 2019 earnings terms.

Ian Browne, a Retirement Expert at Quilter, commented on the findings: “Since its introduction in 2012, automatic enrolment has radically transformed the savings landscape and is engaging more and more workers with their retirement savings, and from an earlier age.

“An all-time high of 88 percent of eligible employees participated in a workplace pension in 2019, considerably more than in 2012, and more money than ever is being put aside for later life.

“The biggest achievement has been narrowing the gap in pension provisions between the public and private sector.

“The private sector traditionally lagged far behind the public sector when it came to employee participation in workplace pensions, but since 2012 the gap has narrowed considerably to only 6 percentage points, from 46 percentage points in 2012.”

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While the figures overall were generally positive, there were still some issues highlighted, as Ian continued: “Despite the provision gap narrowing between the public and private sector, there is still a persistent gap in the level of benefits accrued between the sectors, given the average annual amount saved per worker in the private sector is considerably less than in the public sector as a result of the generous nature of public sector pensions.

“But while the policy has had considerable success in many areas, participation gaps remain, particularly across different ethnic groups.

“Although participation has increased amongst the Pakistani and Bangladeshi ethnic group from 36 percent in 2011/12 to 61 percent last year, this pales in comparison to the white ethnic group, which has the highest participation rate of any ethnicity at 81 percent.”

On top of this, those who are self-employed are also falling behind with their pension savings.

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The self-employed are not required by law to enrol themselves into a workplace pension.

The Pension Advisory Service encourages self-employed people to start a pension scheme as soon as possible.

This could take the form of a personal pension, self-invested personal pension or a stakeholder pension which are all easy to set up and manage.

Unfortunately though, recent analysis revealed that the self-employed are simply not engaging with their pension pots.

As Ian concluded: “The success of automatic enrolment in boosting pension participation must serve as a reminder of the need to extend the policy to incorporate other types of workers, such as the self-employed, who fall outside of the scope of automatic enrolment and are falling behind when it comes to retirement savings.

“Research from the PPI shows that only 15 percent of the 5 million self-employed people in the UK were saving into a private pension in 2019.

“Disappointingly, trials in which self-employed people are prompted to engage with pensions themselves have so far yielded disappointing results, so this must be an issue looked at closely by the DWP in future, especially after many self-employed workers have suffered a financial shock thanks to Covid-19 and fall outside the scope of government support schemes.”

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