Four in five workers are now saving into a pension, compared to fewer than half a decade ago, new figures from the Office for National Statistics show.
Since 2012, employees are automatically enrolled into pension if they earn over a certain amount. That is currently £10,000 a year, although those earning more than £6,240 can request to be added.
Currently, the minimum employee contribution is 5 per cent, with employers adding 3 per cent.
However, one expert warns that millions of workers face a ‘retirement disaster’ by contributing as little as required via auto-enrolment, while some could be tempted to opt-out because of the cost-of-living crisis.
Increase: The proportion of people saving into a workplace pension has increased
The ONS figures also show the average public sector pension pot stands at around £65,400, against £10,300 in the private sector.
‘Differences in pension type by sector may explain disparities in estimates of average-active workplace pension value in 2018 to 2020’, the ONS said.
At present, around 39 per cent of private sector employees contribute to defined contribution pensions, up 2 percentage points since April 2020.
In the public sector, around 82 per cent of employees contribute to defined benefit pensions, up 2 percentage points since April 2020.
Most employees, however, are signed up to a defined contribution scheme, where the saver and their employer pay each month into a fund or selection of funds.
In April 2021, the gap in employee workplace pension participation rates between the public and private sectors was among its lowest levels on record, mainly driven by increased participation in the private sector up from 32 per cent in 2012.
Since auto-enrolment was introduced in 2012, the proportion of private sector workers saving in a workplace pension scheme has more than doubled from 32 per cent to 75 per cent.
Spanning public and private sector pensions, the total number of workers putting cash in a pension stood at 79 per cent in April 2021, representing 22.6million workers, the ONS said. This compares to 78 per cent in 2020.
The ONS said the uptick in the proportion of people saving into a workplace pension was, in part, driven by an increase in the number of people taking on public sector jobs during the pandemic.
Data: The gap in workplace pension scheme participation in the private and public sector has narrowed, but pot sizes still vary significantly
In April 2021, workplace pension participation was the lowest for private sector full-time employees earning between £100 to £199 per week.
In the private sector, the likelihood of having a workplace pension increases with earnings, the ONS said.
Those earning around £600 or more a week have the highest workplace pension participation level at 89 per cent, representing a similar rate to those earning the least in the public sector.
Becky O’Connor, head of pensions and savings at Interactive Investor, said: ‘If we want more people to be less dependent on the state pension in retirement, it would help if the boundaries around auto-enrolment participation are relaxed.
‘The disparities between public and private sector pension provision must also be urgently addressed.
‘There is significant pension inequality between employees who are employed by the public sector with defined benefit schemes and those with defined contribution schemes in the private sector.
‘This is already apparent among current retirees, who have vastly different living standards depending on who they used to be employed by.’
The fresh ONS data also revealed that workers who are not eligible for auto-enrolment, including low earners and young staff, are significantly less likely to contribute to their workplace scheme, according to the findings.
Millions of self-employed workers are also not catered for by auto-enrolment at all, with sizeable numbers having little or no pension wealth.
Tough times: Lower earners in the private sector are among the least likely to contribute to a workplace pension
Stats: Part-time workers are less likely to contribute to a workplace pension than full-timers
Workers in the accommodation or food services fields are the least likely to contribute money towards a workplace pension, the findings added. However, both fields of work have seen a hefty rise in the number of people joining workplace pensions since auto-enrolment rules kicked in back in 2012.
Looking at gender, in April 2021, across all working patterns, workplace pension participation levels were almost equal, at 80 per cent for men and 79 per cent for women.
Jon Greer, head of retirement policy at Quilter, said: ‘Although automatic enrolment has so far proved to be a huge success the real test has begun.
‘The cost-of-living crisis that many are only just starting to feel will stretch finances in a way many have not experienced before.
‘People may choose to opt out of funding their retirement in a bid to have more money in their pocket today.
‘Auto-enrolment largely relies on people’s inertia but significant financial pressures on someone’s finances today may make people take action and reduce or stop pension funding altogether.
‘Although this is understandable, saving for your retirement should be one of the last things you stop doing if money is tight and reducing day to day spending, if possible, should be adopted before any potential.’
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