Workplace pension savers are only putting away a fraction of what they are likely to need for their retirement, experts have warned.
New Office for National Statistics (ONS) figures show that while pension membership has hit a record high, the average contribution rate into a private sector (DC) occupational pension scheme was just 4% in 2015.
Former pensions minister Steve Webb, who is now director of policy at Royal London, said the average 4% rate, which includes contributions from employers as well as workers, is “a genuinely shocking figure”.
He said: “A combined contribution rate of three or four times this size is likely to be needed for most workers to have something approaching a comfortable retirement. It is quite clear that mass membership of pension schemes through automatic enrolment is just the start of a very long journey.”
Automatic enrolment began in 2012 and so far more than six million people have been placed into a scheme by their employer.
ONS data shows total membership of occupational pension schemes in the UK was 33.5 million in 2015, the highest level recorded by the survey and a 10% increase compared with 2014.
Within the latest total, there were 11.1 million active members of schemes, split between split between 5.5 million in the private sector and 5.6 million in the public sector.
Mr Webb said: “The record levels of workplace pension membership in 2015 are hugely encouraging, and the continuation of automatic enrolment since then means that the numbers will continue to surge. But the sting in the tail is the very low rates of contribution into many of these pension plans.”
To encourage people to save, minimum contributions under auto-enrolment are being phased upwards, so that from April 6 2019 they will increase to 8% of qualifying earnings, of which a minimum of 3% must come from the employer.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “The good news is that overall pension membership is on the rise thanks to auto-enrolment.”