Eligible UK employees contributing to workplace pensions saved a total of £90.4 billion ($114.6 billion) in 2018, a £7 billion increase over the amount saved the previous year, according to the UK’s Department for Work and Pensions (DWP).
DWP data shows that annual total amounts saved increased for both public and private sector pensions compared with 2017, although this was far more pronounced among private sector employers whose savings rose £4.5 billion, while the amounts saved in public sector pensions increased £2.5 billion.
Contributions by employers during the year accounted for 64% of the savings, with employee contributions accounting for 26%, and income tax relief on the employee contributions accounting for the remaining 10%.
Eligible public sector employees saved an additional £447 on average in 2018, while there was a slight increase in the average amount saved per eligible private sector employee after a steady decline since 2012. The DWP attributed the falling trend from 2012 to 2017 to an increase in the number of savers in the private sector, which lowered the overall average because many of them made contributions at the minimum level. The DWP said the turnaround was likely a result of an increase in the minimum contribution levels in 2018.
DWP data also found that since 2012, the number of eligible employees participating in a workplace pensions surged by 8 million to 18.7 million. Public sector pension participation remains high at 93%, an increase of five percentage points since 2012; however, the largest increases in workplace pension saving have been within the private sector. Since 2012, private sector participation has risen by 43 percentage points to 85% of private sector eligible employees participating in 2018.
In order to increase retirement savings among the public, the UK government introduced the Pensions Acts in 2007, and then debuted automatic enrollment in 2012 as part of a wider set of pension reforms. The reforms require employers to automatically enroll eligible workers into a qualifying workplace pension plan, and make minimum contributions.
Workers are eligible provided they are aged at least 22, below state pension age, and earn more than £10,000 per year in 2018/19 terms; the thresholds are reviewed annually. They also have to normally work in the UK and do not currently participate in a qualifying workplace pension.
In 2018, the first of two planned minimum contribution increases was implemented. Before April 2018, total minimum contributions were 2% of a band of workers’ earnings, of which at least 1% came from the employer. This rose to 5% in April 2018, of which at least 2% must come from the employer, and will rise to 8% from April, of which at least 3% must come from the employer.
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