-
· Record
pension participation
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· Record
number of small pension pots
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· Collapse
in average contribution to auto-enrolment minimums
The ONS has released its annual survey of occupational pension
schemes (1). (Occupational pension schemes represent a
significant subset of all workplace pension schemes in the UK and
provide a good indication of underlying saver behaviour).
Aviva’s analysis of today’s figures has identified one
encouraging and two concerning trends.
Encouraging – record participation
The delivery of automatic enrolment continues to drive active
membership of occupational pension schemes to record highs.
Today’s figures report a record 17.3 million active members, up
from a low of 7.8 million in 2012.
Concerning – record small pots
The delivery of automatic enrolment is driving an increase in
“preserved” small pension pots.
When an employee joins a new employer, they are typically
enrolled into a new workplace pension, and their former
employer’s pension is left as a “preserved” pension pot. This
“preserved” pot is owned by the individual, and it can be
consolidated with other pensions, but it will no longer receive
contributions from the former employer.
Today’s figures report a record 18 million “preserved” pension
pots. This group of pension pots has risen by more than 80% since
automatic enrolment was introduced in 2012. In 2012, there were
reported to be just 10.2 “dormant pension pots”. In the last year
alone, the number of “preserved pensions” has grown by 2.2
million.
Concerning – inadequate contribution levels
The delivery of automatic enrolment is driving average
contributions towards default minimum levels. As recently as
2012, the average contribution in a private sector occupational
DC scheme was 9.7%. Today’s figures report an average of just 5%
in 2018. This shows that average contributions are falling to the
automatic enrolment minimum.
Aviva’s analysis indicates that at these minimum savings rates,
the typical saver will be unlikely to achieve a target income in
retirement, equivalent to two-thirds of their working salary.
(The ONS have not published the equivalent public sector
data).
Commenting, Alistair McQueen, Head of Savings &
Retirement at Aviva said:
“Automatic enrolment has been a force for good, and its delivery
of record participation has exceeded all expectation. But today
marks the day when we must stop focusing on all that is great
about automatic enrolment and turn our energies to challenging
its unintended consequences.
“The ballooning number of “small pots” will not make it easier
for millions of savers to manage their money. The need for the
pensions dashboard is clearer today than it has ever been. Aviva
is committed to supporting its delivery.
“And the collapse in average contributions to default minimum
levels means that the millions of new automatic enrolment
savers may be set for disappointment when they eventually reach
retirement. Pension providers and employers must continue to
educate their customers and employees about adequate saving, with
Aviva also calling for the minimum contribution rate to be
increased to at least 12% over the next decade.”
- Ends-
Sources:
Contains public sector information licensed under the
Open Government Licence v3.0.
1. https://www.ons.gov.uk/releases/occupationalpensionschemessurveyuk2018
