Despite a significant uplift in the number of people contributing to a workplace pension, the actual contribution level is less than that seen in 2012.
According to official data from the Office for National Statistics (ONS), the proportion of employees who contribute to a workplace pension has increased by almost 25 per cent.
This is majorly due to automatic enrolment – the Government’s mandatory workplace pension scheme.
Under the scheme, employers must set up a workplace pension by law and enrol eligible workers into it. However, the minimum contribution remains low, with an introductory worker contribution rate of one per cent in 2017/18 and three per cent in 2018/19.
The figures have sparked fears among experts that, despite almost 10 million workers saving into a scheme, there will be little to count in the pot in retirement.
“The minimum levels are designed to generate an income in retirement equivalent to about 40 per cent of our working income. Most will want more than this,” said Alistair McQueen, head of savings and retirement at Aviva.
“It’s great that people are saving for retirement, but the next challenge is to encourage more people to save more. In 2019, minimum auto-enrolment contributions will rise to 8 per cent of earnings. Aviva advocates that many should aim for nearer 12 per cent.
“We must ensure that millions of new savers are not being auto-enrolled towards regret and resentment in later life.”
Scottish Widows retirement expert Robert Cochran added that auto-enrolment “may well be providing a false sense of security”.
Workers saving towards retirement are advised to explore various contribution plans, such as contributing more each month or investing into a private pension. For advice on how either of these two options may increase your income in retirement, please get in touch.