Savers paid 11 per cent less into workplace DC schemes last year as the economic effects of the coronavirus pandemic hit, according to the latest ONS data.
The figures show that employee contributions fell by 11 per cent between quarter one (January to March) and quarter two (April to June) of 2020. Over this same period employer contributions were down by 5 per cent.
The ONS data shows that growth in DC membership also slowed over this period. However by the end of the June these workplace pensions still had 23m members, the same figure recorded three months earlier.
The figures also show that pension payments and income withdrawal also fell by 4 per cent in the second quarter, when compared to the last quarter of 2019. However lump sum benefits were up 5 per cent over the same period.
AJ Bell senior analyst Tom Selby says: “With the UK currently in the grip of the second wave of coronavirus, we are now getting a clearer view of the impact the first wave of the pandemic had on people saving for retirement.
“Inevitably the national lockdown hit savers hard. This drop in contributions likely reflects the impact of furloughing, with total auto-enrolment contributions based on 80 per cent of salary for millions of people.
“Some workers will also inevitably have opted out due to pressure on their incomes caused by the pandemic.
“Given total workplace pension membership had been increasing steadily up until March, it seems likely the figure recorded in Q2 2020 of 23 million is lower than it might have otherwise been. Membership of defined benefit (DB) schemes was also broadly stable during the period.
“With the vaccine programme boosting hopes of an economic recovery in the second half of 2021 and beyond, those who have hopped off the retirement saving horse should get back on as soon as they can.
“In doing so, they will benefit not only from a matched contribution from their employer but the added bonus of pension tax relief.”
Interactive Investor head of pensions and savings Becky O’Connor adds: “During the first lockdown, at a time when some were losing jobs or at least part of their income, the growth in membership of workplace pension schemes slowed and contributions declined.
“These figures show us that unless economic fortunes reverse soon, the impact of the pandemic may not just be felt in the immediate term but also in decades to come, when today’s younger workers retire with potentially less than they need, because they were unable to contribute enough to a pension during their working lives.”