Pension scheme membership levels have reached a record high, but falling average contributions into pots have prompted concerns savers are heading for a retirement shock.
Total membership of occupational pension schemes in the UK was an estimated 41.1 million in 2017, the highest level recorded by the Office for National Statistics (ONS) survey.
But looking at defined contribution (DC) pension schemes in the private sector, the average contribution rate being paid into savings pots by employees and their employers was 3.4% in 2017, falling from 4.2% in 2016.
The launch of automatic enrolment into workplace pensions, which started in 2012, has boosted the number of retirement savers.
Alistair McQueen, head of savings and retirement at Aviva, said private sector pension contributions had tumbled from a recent contribution high of 9.7% of salary in 2012, with major implications for the more than nine million people who have been introduced to workplace pensions since automatic enrolment was introduced.
He said: “To their credit, millions of employees have embraced auto-enrolment since 2012, in the belief that it will deliver them a comfortable retirement.
“But based on the current system and today’s data, they’re in for a shock, with many currently on the road to living on less than the minimum wage in retirement.”
The figures showed that active membership of occupational pension schemes - made up of current employees paying in or having contributions made on their behalf - grew from 13.5 million in 2016 to 15.1 million in 2017.
Minimum contribution rates into workplace pensions are gradually being stepped up over time.
Nathan Long, senior analyst at Hargreaves Lansdown, said: “The growth in pension savers shows auto-enrolment has been spectacular at changing the financial future of the nation.
“Attention should now shift to helping everyone gain the confidence to take control of their own retirement if they want to.
“The amount people are paying in needs to rise, but will automatically go up to 8% of earnings when rules change in April next year.”
Clare Moffat, head of business development at Royal London, said: “The increase in the minimum contribution for auto-enrolment will help but as it currently stands these increases will still not be enough to deliver a decent retirement income for the majority of people.
“People need to start thinking about the type of retirement they want to have and how much they need to save to achieve it.