Average workplace pension saving levels drop

Exploding-Piggy-Bank-700.jpgThe average amount paid into pensions by workers in the private sector has dropped in the past year, according to data from the Department for Work and Pensions.

The annual amount saved into pensions by private sector workers was £3,873 per eligible saver in 2017.

According to the DWP data, a decline in contributions is due to an increased number of savers in the private sector, many of whom will be contributing to their pension at the minimum auto-enrolment level. DWP says this will lower the average.

It says: “This is expected to change as a result of the planned increases to the minimum contribution levels legislated for from 2018.”

Hargreaves Lansdown senior pension analyst Nathan Long says: “The Government’s auto-enrolment regime is responsible, as it throws first time savers into a pension although it currently insists on only very low saving levels.”

He says: “Young people are the biggest winners from the rules as their money works harder for them from a much younger age. The first increase in the minimum saving levels happened in April and will rise again in April next year, by then the picture should be looking far rosier.”

The average amount by eligible public-sector workers increased slightly from 2016 to 2017.

The proportion of eligible workers saving into a workplace pension increased to 84 per cent from 77 per cent in 2016.

As well, the total amount saved in 2017 by eligible workers was £90.3bn, which was a £4.3bn increase on the total amount saved in 2016.

However, persistency of saving, which charts the proportion of people who have saved consistently in at least three of the past four years – fell by four percentage points to 73 per cent.

AJ Bell senior analyst Tom Selby says: “Now is not the time for complacency. The small dip in the persistency of saving is potentially worrying, while it is clear the amount people are on average contributing to their retirement pots will need to increase.”

He adds: “When this happens will likely be determined by a combination of politics and the health of the economy, while the reaction of members to contribution increases this year and next year will also be monitored closely.”

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