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25 Feb 2013

Number of Occupational Pension Savers Hits Lowest Level On ONS Records

About 46% of British workers were saving in a workplace pension in 2012, the lowest proportion since the Office for National Statistics (ONS) started its records in 1997, when 55% of staff were in occupational schemes.

However, with the recent pension reforms designed to boost private-sector savings, the drop in the numbers will be likely to reverse as more people will be signed up automatically to a workplace pension scheme, the BBC reported citing pension experts.

According to the ONS statistics, just 32% of private-sector staff had a workplace pension last year, against 83% in the public sector. The data revealed that 26% of private-sector employees were in a defined benefit (often a final-salary) scheme in 2012 compared with 91% of public-sector workers.

Having only a third of private-sector workers saving into a pension is worrying and unsustainable as it means that people won´t be able to retire in comfort and will rely more on the state, said Joanne Segars, head of the National Association of Pension Funds.

Yet, Segars believes that the numbers have hit the bottom and are set to rise with the automatic enrolment system that kicked off last October. The system is being phased in over six years, with employees of the biggest companies signed up first in October 2012. With automatic enrolment, millions of workers will gradually see a portion of their take-home pay package being automatically diverted into a savings pot towards retirement. Employers are also obliged to contribute, as is the government, which will do it via a tax relief.

While the early signs of the enrolment programme are promising, it may require further measures, and they would be better taken sooner than later, to halt the decline and to encourage people to save for retirement, according to Malcolm McLean, consultant to actuaries Barnett Waddingham.

Copyright © M2 Bespoke 2013

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