The number of adults saving money in a workplace pension scheme is higher than it has been in seventeen years, reversing the trend of decreasing participation which began in the 1990s.
The reason for the huge boost in numbers saving through a company pension is that a large number of young people in their twenties have now joined their workplace scheme.
In 2013, fifty per cent of all employees saved for their retirement. By 2014, this figure had grown to 59 per cent, figures from the Office for National Statistics have revealed. Although all age groups have contributed to the increase, the biggest leap in numbers was among young people in their twenties. Fifty three per cent of 22 to 29 year olds are now saving into their company pensions, compared to 36 per cent in 2013.
The increase is chiefly due to the government’s automatic enrolment programme which was introduced at the end of 2012. Employers are now compelled to enrol all their employees over the age of 21, who are earning more than £8,000 per annum, into workplace pension schemes.
According to Nigel Stanley, TUC’s head of campaigns, auto-enrolment has been a big success. Like the minimum wage, auto-enrolment was unpopular with employers when it was first introduced but has now been accepted. However, he added that the rules concerning levels of contribution were not sufficient to give people a ‘decent’ income at retirement.
Auto-enrolment will be fully implemented by 2018 when the minimum contribution will be 8 per cent of employee earnings, three per cent of which will be contributed by the employer. At present, employees are only paying one per cent of their salary and employers pay only a further one per cent.
There is also an increase in those who do not qualify for auto-enrolment, such as part time workers and 16 to 21 year olds choosing to save for retirement.
