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Pensions – UK Data July 2019

I’ve cut and pasted the following data from The Money Charity’s report received on 24/07/2019:

According to The Pensions Regulator’s Compliance Report, at least 10.11 million employees had joined a pension scheme under auto-enrolment by the end of June 2019, making a total of 22.12 million members of pensions schemes, but leaving 9.4 million employees unenrolled, out of the total declared workforce of 31.55 million.

According to the Family Resources Survey, 49% of working age adults actively participated in a pension in 2017-18, up 4% on the previous year. This was 71% for employees and 16% for the self-employed. The Annual Survey of Hours and Earnings reports that in 2018, 19.6% of private sector employees received an employer contribution to their workplace pension of 8% or more, whereas 94.8% of public sector employees received a contribution of 12% or more.

36.4% of employees with a pension were in an occupational Defined Benefit scheme in 2018, according to the Office for National Statistics, while 34.0% were in an occupational Defined Contribution scheme.

In August 2018, there were 13 million claimants of State Pension, a fall of 110,000 on August 2017. Of these, 960,000 were receiving the new State Pension (nSP) introduced in April 2016.

 

My thoughts on the above data:

It is good news that more people are in pensions, Auto Enrolment has helped with this.  However, I have a few real concerns with the data above.  They are as follows:

  • Those ‘Auto Enrolled’ into a Workplace Pension but not receiving advice could think that at standard Auto Enrolment contribution levels, the legislative basis, they have a pension for their retirement. A pension funded on the standard ‘minimum legislative’ basis will not provide much of a pension fund for your retirement
  • The self employed are still not getting the message. They need to be in pensions too, perhaps legislation in this area?
  • We need changes to Auto Enrolment on the following counts:

 

  1. Lower age, enrolled from age 18
  2. All of your salary should count for the contribution basis. Currently we have a lower and upper threshold and you don’t have to contribute against full salary (in generic terms)
  3. Higher level of contributions

Although the State recognise the need for changes to 1 & 2 above they want to defer until c 2025 as they have no more money to spend on pension tax relief.

 

  • Those in a Public Sector Defined Benefit pension scheme will be doing well. Politicians enjoy good (very good) pension provision
  • We seem to have quite a large proportion of the population still not in a pension. These might be people with 2 or 3 low paid jobs who are not hitting the lower threshold?  They could be people who have opted out under financial pressure or they could be people outside of the criteria.  Whoever they are everybody needs a pension unless you are very wealthy.

One of the key issues and a missing piece of the jigsaw is financial education.  We should start this at school and continue through college, university and in the workplace.

If we can catch people at a young age and spell out the benefits of good financial literacy and planning I believe we can make a real difference.

 

 

Steve Speed

24/07/2019