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Membership of workplace pension schemes falls to lowest level in 15 years

Membership of workplace pensions schemes has fallen for the 11th year in succession to 46%, a 15-year low, figures from the Office of National Statistics (ONS) have revealed.

The ONS figures, collected prior to the introduction of auto-enrolment in October 2012, showed the proportion of all workers joining a workplace scheme was at its lowest level since 1997 when the figures were first collated. In that year, 55% of workers were paying into schemes.

Defined benefit (DB) pension schemes, also known as final salary, continue to decline, with the number of employees paying into them standing at 28% compared with 30% in 2011 and 46% in 1997.

The fall has been greatest in the private sector. The ONS said these schemes, which offer a guaranteed payment based on a worker's earnings, have become increasingly expensive to run, and many firms have closed them to new workers.

Joanne Segars, chief executive, National Association of Pension Funds (NAPF), said workplace pensions cannot be left to "fade away" and these latest figures show a "real low-point" for pension saving.

"We have hit this trough largely because final salary pensions in the private sector closed at a record rate last year," Segars said.

"For many pension funds the problems created by quantitative easing will have been a factor behind the decision to close."

She added: "It is unnerving and unsustainable that only a third of the private sector workforce is saving into a pension. This is storing up huge problems for our society. People simply will not be able to retire in comfort, and will lean more heavily on the state.

"We hope that this is the worst things will get. Millions will be automatically put into a pension in the coming years, so the only way is up. Auto-enrolment is a great opportunity to turn the situation around and get more people saving for their retirement."

Commenting on the figures, TUC general secretary, Frances O'Grady, said: "The difference between defined benefit and defined contribution pensions attracts a lot of attention. But there is an equally important and growing divide within DC schemes too.

"Increasingly, workers in trust-based schemes have employer contribution rates above 8%, which is essential to build up a decent retirement income.

"In contrast, a growing proportion of workers in contract-based schemes have employer contributions of less than 4%. Many people saving into these schemes could find themselves with a low income in retirement, even after years of saving."