The number of employees saving into a workplace pension scheme has fallen to a record low of 48 per cent, official statistics show.
The figures from the Office for National Statistics (ONS) are the lowest recorded, down from 55 per cent in 1997 when records started, and will come as worrying news to the Government already concerned about a looming pension crisis.
The figures also indicated a widening pension’s gap between the two sectors, with 83 per cent of public sector employees being members of a workplace pension scheme, compared with only a third in the private sector.
According to the ONS, the drop in workplace pensions over the last 14 years ‘has been mainly driven by the fall in membership of defined benefit occupational pension schemes over the same period’ which fell from 46 per cent to 30 per cent. Defined contributions also fell slightly from 9 per cent to 6 per cent.
Defined benefit pensions, which are typically ‘final-salary’ schemes, are widely considered the most generous pension policy for employees. However, faced with rising pension costs, many companies are now closing final salary schemes to both new and existing members.
A survey from the Confederation of British Industry (CBI) at the end of 2011 found that ese closures are set to continue, with the number of firms shutting defined benefit schemes to existing members set to increase by 50 per cent over the next two years.
The ONS’ data found that group personal and group stakeholder pensions, a popular alternative to defined benefit pensions, on the other hand increased from one per cent to 10 per cent over the same period, although the majority of UK employees are still not saving for their retirement.
Commenting on the figures, Darren Philip, policy director for The National Association of Pension Funds (NAPF), said: “We’ve passed an important and worrying landmark. Less than half the workforce is now saving into a pension, and with people living longer the UK is facing a growing headache in paying for its old age.
“It is encouraging that saving has held up in the public sector. But it is a worrying picture in the private sector, which has seen a significant fall in pension uptake.
“Sadly, the fall in people saving into a final salary scheme has not been fully matched by interest in other types of pension. The weak economy and falling confidence in financial products have also spurred many private sector workers to quit pensions altogether.”
Speaking of the upcoming pension auto-enrolment, Philip also added: “Upcoming reforms to automatically put all workers into a pension will be a huge help in tackling the UK’s savings crisis, especially in the private sector. The reforms could bring between five and nine million people into a pension, including younger people and many part-time workers.”
