Automatic enrolment has sparked an increase in participation rates for workplace pensions which in turn has helped to narrow participation gaps by age and ethnicity, although income gaps remain persistent.
Between 2016 and 2017, the share of employees saving into a workplace pension increased from 77% to 84%, the latest figures provided by the Department for Work and Pensions reveal. Similarly, the total amount saved increased from £84bn to £90.3bn compared to the previous year.
At the same time, the persistency of savings, measuring the share of people who saved for at least three of the past four years, has declined slightly, from 77% to 73% yoy.
Over the past six years, the share of younger people enrolled in workplace schemes, particularly those in the private sector, has increased sharply. In 2012, only 24% of 22 to 29 year olds in the private sector were enrolled in a pension scheme, the share has now increased to 77%, bringing it much closer to average enrolment levels for older age groups in the private sector, where more than 80% are enrolled in a pension scheme.
Similarly, employee participation has also increased across all ethnic age groups, with the Pakistani and Bangladeshi ethnic group showing the largest increase from 36% to 58% while participation among the Indian ethnic group increased from 49% to 62%. On average, the white ethnic group appears to benefit from the highest participation levels in pension schemes, with 73% enrolled in a scheme as of 2017.
While the DWP data sketches an overall positive picture in terms of participation, a recent survey on pension’s income by Prudential as well as the latest ONS data revealed that inequalities in terms of pay and gender remain.
Maike Currie, investment director for Fidelity International comments: “Auto-enrolment has played a significant role in helping to level the playing field by making sure everyone has the ability to save into a pension. However, more work still needs to be done to encourage workers to stay enrolled. This is especially important for women who often retire with much smaller pension pots than their male counterparts.”
“While the gender pay gap is a long running concern, its knock-on effect on our pension savings means the gender pension gap is almost twice as much. The latest figures from ONS on pension wealth prove this and show that women aged between 55-64 have (on average) £9,000 in their DC pension compared to men who have £20,000” she adds.
