15% drop in pension saving since 2007

Posted on 27 Jul 2012

Only a quarter of private sector employees in the UK are active members of their employers’ pension scheme, down from a third in 2007.

The new research from the Department for Work and Pensions shows a 15% drop in employees’ pension saving overall.

Just 31% of private sector organisations currently offer any pension provision for their staff, down from 41% in 2007.

However, the government has made many changes to pensions in the UK, one being that every employer will now have to enrol staff in a new national pension scheme unless they already offer a comparable pension scheme.

With an people living increasingly longer and a trend for employers not to offer pension schemes to new staff, the Government is targeting the nine million or so employees of private sector firms that are not financially safe in later life.

From October this year, companies will now need to make a minimum contribution for many of these workers.

The Department for Work and Pensions estimates that this will affect 750,000 employers not offering any form of pension.

Pensions Minister Steve Webb said that automatic enrolment will reverse the slump in pension saving, with around half of British firms with no pension provision set to use the new national pension scheme, called the National Employment Savings Trust (NEST).

Of the companies firms without a current workplace scheme, 45% intend to enrol all their employees into NEST. A further 11% say that they will set up their own scheme, while 5% say they will use a combination of both.

Pensions Minister Steve Webb said that business is facing a major change, especially firms that don’t currently offer pension schemes for staff.

“Automatic enrolment into workplace pensions will start the monumental shift we need to get millions more people in Britain saving for their retirement,” he said.

The Government expects around half of all new savers to be NEST members, including many low-paid and part-time workers, women and young people, who will get a contribution from their employer for the first time.

Most firms that already offer some form of workplace provision plan to keep all current members in their existing scheme (60 per cent). Half of the 3,000 employers involved in the research said that they will use their existing scheme for all non-members and new employees, with 19% set to enrol all non-members and new employees into NEST.

Only around a fifth of all private sector firms offer some form of workplace based scheme open to new members. Even where employers offer open schemes access may be restricted to certain groups of employees such as those who had been working for the firm for a certain period of time.

Helen Dean, managing director for scheme development at NEST said: ‘The decline in the number of workers actively saving into a workplace pension, coupled with the fall in the numbers of private sector organisations which offer any pension provision, should concern us all. The DWP research clearly demonstrates the need for automatic enrolment, which will help millions of people in their later lives.”