ONS: DC membership up 20% in 2017 but contribution rates fall by 19%
Occupational pension scheme membership hit a record high in 2017, with more than 41.1 million people saving through the workplace, latest Office for National Statistics (ONS) data reveals.
The membership numbers are up 5% from last year's data, when this figure rested at 39.2 million, according to the statistical body's Occupational Pension Schemes Survey 2017 unveiled today.
Defined contribution (DC) active membership in the private sector rose from 6.4 million in 2016 to 7.7 million last year. However, defined benefit (DB) active membership has fallen again, to 1.1 million in 2017, down from the 1.3 million recorded in 2016.
The surge in DC members also means the private sector continues to take over the public sector in this respect. Active membership for private sector schemes was at 8.8 million in 2017, compared with 6.3 million in the public sector. Both have increased from 2016 - when it was at 7.7 million and 5.7 million respectively.
Contributions
Low AE contributions - which rested at 1% from the employer and 1% from the employee in 2017 brought down average contributions yet again. For private sector DC schemes, average member contributions were at 1.2% from members, compared with 1% in 2016. However, employer contributions fell from 3.2% in 2016, to just 2.1% last year. In total, overall contributions decreased by 0.8% (from 4.2% to 3.4%) - a fall of some 19%.
It is important to note that this data was recorded before the contribution rate increases in April, which saw total contributions increase to 5%. 2018 data is likely to show a surge in both member and employer contributions. An even bigger surge is likely in 2019, when contribution rates will increase to a total of 8%.
For DC schemes with 100 to 99 members, average contributions were at 8.3%, and 9.4% for schemes with 1,000 to 4,999 members. However, there was no apparent trend based on the number of members, as for DC schemes with 5,000 to 9,999 members - average overall contributions were at 8.1%. For those with over 10,000 members - average contributions were at 3%.
Meanwhile, for private sector DB schemes, average member contributions were at 6% in 2017, up 0.2% from last year, while employer contributions were at an average of 19.2%. In 2016, average employer contributions were at 16.9%.
For DB schemes with 12 to 99 members, total average contributions were at 40.7%; 28.7% for schemes with 100 to 999 members; 25.8% for schemes with 1,000 to 4,999 members; 26.3% for those with 5,000 to 9,999 members. For DB schemes with over 10,000 members average overall contributions were 24.6%.
Commenting on the findings, Aviva head of savings and retirement Alistair McQueen said low AE contributions will have major implications for the 9.8 million people who have been introduced to workplace pension since AE was introduced in 2012.
"Aviva calculates that at AE minimums, a typical 22-year-old could be on track for an income in retirement equivalent to just £6.55 per hour. This is less than today's national minimum wage of £7.83 per hour.
"Aviva advocates that this minimum contribution must be increased to at least 12.5% of salary by 2028 - shared between the employer, the employee and the tax man. To do so could increase a typical 22-year-old's income in retirement to an equivalent of £8.45 per hour - above the minimum wage of £7.83 per hour."
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