Pension participation remained unchanged at 88 per cent as total annual savings for eligible employees reached a record £131.8 billion in 2023, according to The Department of Work and Pension (DWP).
According to the DWP’s Workplace Pension Participation and Savings Trends, which covers trends in pension participation and savings, the savings figure includes employees contributing 26 per cent, employers 64 per cent, and income tax relief covering 11 per cent.
The report also shows that the quarterly opt-out rate remains below 1 per cent, with around 8-10 per cent of new savers opting out in the previous year.
Standard Life managing director for workplace pensions Gail Izat says: “It’s encouraging to see that the workplace pension participation rate in the UK stayed solid at 88 per cent in 2023 despite ongoing cost of living pressures through the year. Auto-enrolment has brought millions of people into the pension system since its introduction in 2012 and this shows that a savings habit has taken hold.
“However, we still have an under-saving issue in the UK and more needs to be done to help people secure a decent standard of living in retirement. Parliament passed an act aimed at lowering the age of eligibility for auto-enrolment to 18 and removing the lower earnings limit last September and, when implemented, this should boost pension participation further. We hope the new Government will move quickly to progress this legislation. Longer-term, the single biggest lever we can pull to improve retirement outcomes is to raise minimum contributions and we hope action on this will come out of the Pensions Review recently announced by the chancellor – part of which rightly focuses on saving adequacy.”
Broadstone senior consultant Richard Sweetman says: “It is pleasing that after a dip in workplace pension savings in 2022, probably driven by the cost-of-living crisis, total savings bounced back in 2023. However, this appears to be driven by an expanding population of savers rather than an increase in individuals’ payments to their pension pots, raising doubts over employees’ future retirement adequacy.
“We know that more needs to be done in terms of increasing pension contributions so that the workers of today can achieve a decent standard of living in retirement. It is promising that the second stage of the recently announced Pensions Review will focus on adequacy, and we hope to see concrete steps and timeline for rapidly building employees’ contributions.
“There is never a good time for workers to see their monthly take-home pay shrink, but every year that goes by without mandating higher contributions will have an outsized impact on their total pension pot.
“It is also pleasing that while new saver opt-outs did nearly double through 2020 and 2021, they stabilised and are now beginning to decrease. Active savers stopping saving remained low throughout which, again, is a positive and a testament to the power of inertia.”
