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DWP: Workplace pension participation and savings trends - "Apathy wins"

ended 22. November 2023

This morning, the Department for Work & Pensions published a report entitled, Workplace Pension Participation and savings trends of eligible employees: 2009 to 2022. The full report can be read here, key points below. Newspage asked advisers for their views, bottom.

  • Overall, 88 per cent of eligible employees (20.4 million) were participating in a workplace pension in 2022. Overall trends in participation have increased since 2012, driven by the private sector while public sector participation has remained high.
  • There is relatively low participation for some eligible groups, such as around 59 per cent for employees of micro employers and below 75 per cent for Pakistani and Bangladeshi, and Indian employees (ethnicity is calculated using a 3-year average).
  • Total annual workplace pension savings for eligible savers was £115.9 billion in 2022. While this represented an increase in savings in cash terms from 2021 (around £1.2bn), when adjusted to 2022 earnings levels, this represents a real terms fall (around £5.6bn).
  • HMRC RTI data shows the proportion of savers making an active decision to stop saving in 2022 to 2023 remains low and similar to previous years at less than 1%.
  • In the financial year 2022-23, the percentage of workplace pension savers stopping saving following an active decision to stop saving was around 0.8%; similar to last year at around 0.7%.

7 responses from the Newspage community

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Wes Wilkes
CEO at IronMarket Wealth
This pension participation and savings data has to be seen as a roaring success for the advent of Auto Enrolment, particularly with the numbers being so high in the private sector. There is work to do in participation for some eligible groups, which likely relates to low earnings and apathy. The data in cash terms may be skewed a little from 2021 through 2022 given the huge strength in the labour market and the high levels of wage inflation. In nominal terms, the savings numbers are still very positive. Now policy needs to shift to education and choice so that these increased savings can best serve savers and their futures.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
Ministers at the DWP will be patting themselves on the back for the overall increase in pension participation. However, dig into the numbers and you will see that typical employee contribution rates are still in single figures. This is simply not enough to fund a comfortable retirement for most. I fear that auto-enrolment has set the bar too low and led to a culture of government-sanctioned complacency.
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Samuel Gee
Director at Manning Gee Investments Limited
Workplace pensions have proven instrumental in facilitating automatic retirement savings, significantly impacting individuals previously without such provisions. However, the focus must extend beyond contributions; a high proportion of employees are unaware of actually what their pensions will do for them and how they are invested. To truly support their workforce, conscientious employers should evaluate and implement high-quality pension schemes, surpassing mere regulatory compliance at often a lower cost to the relatively generic schemes offered. Giving transparent insights into their employees' retirement has the potential to substantially elevate the value of workplace pension offerings to something that offers real value to the individual.
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David Robinson
Co-Founder at Wildcat Law
Apathy wins. When auto-enrolment was first put in place, it was based on the idea that most savers were apathetic. If they had to do something to opt in, many would not, hence the failure of the stakeholder pension scheme. Conversely, if they had to do something to opt out, many would not, and this has proven to be the case even when resources are stretched. It is not surprising that micro-employer take-up is low, and this is often due to many micro-employers employing the owners or relatives, and they often cannot afford to save into their pensions as employers so choose to opt-out. Of the 6% of SME's owned by ethnic minorities in the UK, the majority are owned by those from south Asian descent so again, it is not surprising that this combines to give a low level of uptake from Bangladeshi, Pakistani and Indian ethnic groups. The real test will lie in the months ahead as businesses face strong economic headwinds combined with rising staff costs.
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Graham Wells
Founder and Financial Coach at GroWiser Financial Coaching
It's good to see the trend of improving financial engagement, with more and more people joining pension schemes as a result of auto-enrolment. A possible concern is that contribution levels have decreased in real terms, which could well be down to affordability and the cost of living. I don't recall any clients on the approach to retirement age regretting money they paid into pensions, but there are plenty of stories about people who wished they'd paid in more when they were younger. Of course, pensions are not the only way to prepare for later life. Self-investment in knowledge, skills and health can pay dividends too.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
It is great that so many people are now participating in workplace pensions. However, is still a long way to go to ensure that everyone can have a comfortable retirement. Most people are not contributing enough into their pensions. We need to educate people so they can understand the positive impact of putting money aside into their pensions and the shortfall they will have in retirement if they do not. Certain ethnicities, such as Pakistani, Bangladeshi and Indian employees, appear to have low participation rates. We need to understand why this is so that we can help these people have comfortable retirements. Younger workers are now joining pension schemes much earlier, which is good news. Having your money invested in a pension for 30-40 years as opposed to 10-20 years means that, if invested sensibly, with the power of compounding, your money will grow substantially.
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Gary Bush
Financial Adviser at MortgageShop.com
On the face of it, to read that 20.4 million employees are contributing to a Workplace Pension is a success story that should be applauded. However, I'd personally like to see the drill-down of data to confirm what percentage of these people will have a pension that would fund 75% of their intended last year's salary at retirement. Remembering before the time of Workplace Pensions it was clear to advisers that some form of government mandatory or coercing behavior was needed to attempt to bridge the massive pension income gap. But has this managed this, we suspect not enough. The UK has a massive problem that has been looming up on it in that as the population grows and the lengthening mortality rates continue, State Pension demands on the Treasury purse are growing. The general public's lack of savings in general is a worrying trend that needs advisers, providers, and the government to sit down and fix . The solution is there it just needs to be bashed out.