Although the numbers of grandparents and other family members who help with childcare...read more
The proportion of employees who contribute to a workplace pension has increased by almost a quarter, around 73% of UK employees had an active workplace pension scheme in 2017, up from less than 47% in 2012, according to figures from the Office for National Statistics.
Much of the rise is down to the introduction by the Government of automatic enrolment in October 2012. This means that employers have to automatically enrol those aged over 22 and earning more than 10,000 pounds a year on a pension scheme.
While there has been a sizeable increase in the number of people participating in workplace pensions, the ONS says many in the private sector with defined contribution pension schemes are contributing at relatively low levels.
Last month, the minimum overall contribution rate to an automatically enrolled pension rose from 2% to 5%, of an employee’s qualifying earnings, with the minimum contribution from the employer rising from 1% to 2%. An employer may opt to pay all the total minimum, but if an employer only contributes their minimum rate, the employee must make up the difference. Next April, the total contribution rate will rise again to 8%, at least 3% of which must come from an employer.
In 2017, almost half of private sector employers with defined contribution schemes contributed less than 2% of pensionable earnings, compared with around 6% in 2012. The ONS says this is because automatic enrolment has led to an influx of new savers at low rates – particularly the young and low paid, changing the distribution of employer contribution rates. In 2017, around 45% of private sector employees with defined contribution pension schemes were contributing less than 1% of pensionable earnings, and only around one in three employees were contributing 3% or more.
For those in caring and leisure, sales and customer service and elementary occupations who are among the lowest paid, the proportion of private sector workers paying into defined contribution schemes was close to half in 2017. Five years earlier, the majority of workers in these jobs had no active workplace pension.