UK pension savings at record high
According to the ONS, more than half (59.4%) of employees were members of a workplace pension in 2014, up from 49.8% in 2013 and the total of 46.5% in 2012, and the highest since 1997. The overall growth was driven by auto-enrolment and increases in membership of occupational defined contribution (DC), as well as group personal and stakeholder pension schemes. By July 2015, over 5.4 million workers had been successfully enrolled since the auto-enrolment began in October 2012.
New pensions business rose by 20.8% in 2013, but declined by 16.8% to £30.6 billion in 2014, according to a new report by Timetric’s UK Financial Services. ‘Despite an increase in workplace pension participation, new business premiums fell sharply following the first wave of auto-enrolment,’ said Laura Balkarova, economist at Timetric.
The largest businesses, with more than 250 employees, completed their auto-enrolment duties by the end of March 2014. Smaller businesses, with less than 50 employees, are now beginning to approach their staging dates.
The value of new workplace pensions business declined by 26.7% in 2014, but was still higher than in 2012. However, individual pensions business increased by 8.5% last year, which is likely to have been prompted by the new pension flexibilities announced by the Chancellor George Osborne in March 2014. The changes introduced greater freedom over how retirees can access their pension pots, creating more incentives for people to save.
‘The new pension rules, auto-enrolment and the rising state pension age are expected to lead to greater engagement with pensions,’ Balkarova added. ‘The biggest challenge for the industry will be ensuring the success of auto-enrolment is repeated by smaller employers in the months ahead. That said, over 1.8 million employers will have to meet their auto-enrolment duties over the next three years.’