Latest ONS figures show contributions to personal pensions fell in 2008-9 and again in 2009-10, reflecting the impact of the recession. A million people stopped making payments into personal and stakeholder pension schemes during this period.
Pension trends revealed
The latest figures for pension contributions are detailed in an updated version of the ONS publication, Pension Trends. The report shows how personal and stakeholder pensions have been hit particularly sharply by the recession, with a million fewer people paying into these schemes, reducing the total contributions received from £20.9bn in 2007-8 to £18.7bn in 2009-10.
The report’s authors note that: ‘Personal and stakeholder pensions are flexible, allowing people to make contributions when they have money available and stop contributing in times of hardship’.
Workplace pensions to change
The latest ONS figures are concerned with personal pensions, but the same report also gives numbers for occupational pension schemes, with 8.7m people recorded as active members of these (3.3m in the private sector and 5.4m in the public sector). Only 50% of UK employees were members of an employer-sponsored pension scheme in 2009, however, so many run the risk of a ‘pension gap’ when they come to retire, relying on state pension alone for their retirement income.
Which? pensions expert, Ian Robinson, says: ‘The drop in contributions recorded by ONS is understandable, but this should only be a temporary reduction. The failure of people to join a company scheme is more worrying, as they will lose out on what’s effectively extra pay.
‘Although employer contribution levels in defined contribution workplace schemes are lower than those made into defined benefit (final salary) schemes, they still give a significant boost to most people’s pension saving. The government also helps pension savers with generous tax relief. From 2012 onwards, employers will start to enrol their workforce in a pension scheme automatically. The new National Employment Savings Trust (NEST) is available for those who lack a scheme of their own. In the coming years, this should transform pension saving and mean that far fewer people are left with no top-up provision.’