The number of people paying into employer-backed company pension schemes has fallen significantly since 1997, with those own lower incomes far less likely to be saving for retirement according to a new report.
Data from the Office for National Statistics shows that participation in private sector pension schemes is falling. In 2010 just 39% of male employees and 28% of female employees belonged to employer-sponsored schemes, compared with 52% and 37% respectively in 1997.
The link between income and pension savings has also been highlighted by the ONS’s research, which shows that in 2010 only 16% of male and 27% of female full-time employees earning less than £300 a week belonged to a company pension scheme. Those with high earnings, the ONS says, are fare more likely to be putting money aside for the future.
Meanwhile, the statistics also show that self-employed people are now less likely to be putting money in to a pension than they were in years past. In 2009, 38% of full-time self-employed men in Great Britain belonged to a pension scheme – down dramatically from 64% in 1998/99.
If you’re concerned about how you’ll fund your retirement, or have questions about what sort of pension scheme might suit you, sign up now to take part in our live pensions Q&A on 1 July. It’s a Which? member exclusive, and we’ll have experts on hand to deal with all your queries.
You can also learn more about company pensions by watching the video below.
Pension Trends point to ‘potential poverty in retirement’
According to the ONS, its two recent Pension Trends reports point to ‘potential poverty in retirement for people on low incomes who do not build up sufficient private pensions, or other savings to supplement the state pension.’
Its research also shows that while participation in pension schemes in the private sector fell between 1997 and 2010, in the public sector it was unchanged for men, at 87%, and actually rose for women – increasing from 75% to 82%.
Elsewhere, the ONS has found that ‘of all economically active people, those in the lowest socio-economic groups and single parents are the least likely to belong to pension schemes. As with low earners, people in these groups are most likely to face poverty in retirement as a result of insufficient savings to supplement the state pension.’
NEST to encourage extra pensions saving
Which? pensions and retirement expert Ian Robinson says: ‘Saving for retirement is of crucial importance, and the ONS’s data paints a worrying picture – particularly for the poorest in society, who probably feel they simply can’t afford to be putting money aside.
‘It’s hoped that a change in the law on pensions, alongside the launch of the National Employment Savings Trust (NEST) in 2012, will increase participation in private sector pension schemes.
‘Employers will be forced to provide contributory pension schemes when the law changes, and can introduce NEST if they do not offer an alternative ‘qualifying’ scheme. Meanwhile, employees will be auto-enrolled in their employer’s pension scheme provided they are aged 22 or over and earn at least £7,475.’
It is expected that around 4m people will join NEST, although it will be possible to leave the scheme after enrolling. NEST recently appointed a panel of annuity providers, who will help people belonging to the scheme choose a suitable product to generate their retirement income.
You can read more about different types of pension schemes by visiting the Retirement section of the Which? Money website. Our advice guide on Planning your retirement is also a good place to start exploring your options if you are unsure of how to prepare for later life.
Which? Money – Live pensions Q&A
Are you baffled by state pensions or Sipps? Are you worried about being able save enough for your retirement? Whatever your pension questions, Which? experts will be on hand to answer them during our live Q&A on Friday 1 July.
Sign up now to take part in this exclusive event for members at www.which.co.uk/pensionsqanda, or log on at 12.30pm on the day to get involved.