According to data published by the Office for National Statistics today, membership of private pensions (as opposed to the National Insurance funded state pension) has hit a new low; just 35% of men and 32% of women aged between 16 and 64 were active members of a private pension in 2011/12.
Membership of Defined Benefit pensions has declined from 46% of employees in 1997 to just 28% in 2012, almost exclusively now in the public sector.
Participation rates of employees varies dramatically between public and private sectors, with 85% of men and 81% of women in the public sector, compared to 36% and 26% respectively in the private sector.
Hargreaves Lansdown comment, Tom McPhail, Head of Pensions Research ‘These figures illustrate dramatically how important it is that auto-enrolment succeeds over the next 5 years. It is vital that nothing is done to jeopardise this project and that everything possible is done to encourage people to stay enrolled in their workplace pensions. Recent calls for reform of pension taxation or for small businesses to be exempt from auto-enrolment should be postponed or ignored until the foundations of a savings culture have been properly laid.’
Separately, the ONS has reported average contribution rates as 19.2% of payroll for Defined Benefits schemes and just 9.4% for Defined Contribution arrangements.
Tom McPhail: ‘The inevitable consequence of this level of pension funding is that millions of people will have to work on into their 70s because they won’t be able to afford to retire earlier. All defined contribution members should be shown what their contributions are likely to buy for them in the way of a retirement income, this pension projection should be updated regularly and members should be encouraged to engage with their retirement planning. 9.4% as an average is simply not enough. Investors should aim to be contributing at least 12% of their income towards their retirement. For a more personal estimate, they should use an online pension calculator.’
Many pension calculators are available on the internet, this is one example http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator
What do you think? Do you have a pension?