Money: Pension scheme memberships dip below 50% for first time

MEMBERSHIP of company pension schemes in the UK has dipped below 50 per cent for the first time on record, the Office for National Statistics has revealed.

Just 48 per cent of workers pay into any kind of company pension, its latest Pension Trends report shows.

Its figures also underlined the terminal decline of final salary pensions in the private sector. Just 9 per cent of employees paying into such a scheme, down from 37 per cent just 15 years ago.

Most employers have replaced their final salary scheme with defined contribution (DC) pensions, where the outcome is dependent primarily on the number of years a member pays into it and the level of contributions.

But the amount paid into DC plans compares poorly with final salary pensions, according to the report. While employers pay 15.8 per cent of an employee’s salary into their final salary scheme, on average, the equivalent contribution into worker DC pots is just 6.2 per cent.

Contributions by individuals in DC schemes are lower as well, at just 2.7 per cent on average, compared with the 5.1 per cent the average final salary scheme member pays in.

The number of people saving into personal pensions has plunged alarmingly too, dropping to six million.

The report was published just months before the introduction of radical reforms will see millions of people placed automatically into workplace pensions.

Tom McPhail, head of pensions policy at Hargreaves Lansdown, said: “It is absolutely vital to focus on how much people should be saving if they are to hit their retirement income target. Anyone who is saving less than 10 to 15 per cent of their earnings into a retirement plan is unlikely to be saving enough.”