Contributions into DC pension plans have continued to recover following the initial Covid lockdown according to new figures from the Office of National Statistics.
If latest published data shows that employee and employer DC contribution grew by 19 per cent and 18 per cent respectively in the second quarter of 2021, when compared to the same period in 2020.
The figures show that private sector DC members increased by 2.7m over this period.
Up until the end of June 2021 the total number of members in DC schemes stood at 25.3m, significantly higher than total DB and hybrid membership, which stood at 18.5m.
The ONS data also shows there has been an increase in the benefit payments made from both DB and DC schemes. Private sector DB scheme benefit payments increased by 9 per cent between the first and second quarter of 2021. However there was a 51 per cent increase in DC benefit payments over this period.
This could be due to a number of factors, including an increase in death rates due to the pandemic and also more people choosing to retire, or access cash from these savings.
The value of gross assets excluding derivatives of DB increased by 3 per cent between the end of March 2021 and the end of June 2021. Over the same period, private sector DC and public sector DB schemes also experienced growth, of 9 per cent and 4 per cent respectively. The strong showing from DC schemes can be attributed to the growth in membership.
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey says: “While there were concerns the pandemic would lead to an exodus from pension schemes and plunging contribution rates, the growth of DC schemes is undeniable with membership soaring to 25.3m at the end of June 2021.
“The pandemic had an enormous effect with furlough and increased redundancy rates meaning employer and employee contributions temporarily plunged last year but they have since bounced back and DC membership continues to grow.
“While contributions and memberships are on the rise, we can also see an increase in benefits being paid out. Between Q1 and Q2 2021 we saw a sharp 51 per cent increase in pension payments and income withdrawals – including death benefits for DC schemes.
“This compares to around 9 per cent in private sector DB. While some of this will be explained by the horrible death toll of the pandemic, we could also see this as evidence that people have chosen to retire early or access their pension early to cover financial expenses.”
