Pressure on household finances has failed to erode pension participation, including auto-enrolment (AE), according to official figures.
The workplace pension participation rate for employees eligible for auto-enrolment was 88 percent in Great Britain in 2023. This rate is unchanged from 2022, but the number of eligible employees has increased by 0.4 million, reaching 20.8 million in 2023, according to data from the Department for Work and Pensions (DWP).
Employees are eligible for AE when they are aged 22 to state pension age and earn more than £10,000 a year.
DWP data showed that after years of growth in AE participation during the roll-out phase, rates have stabilised in recent years. People opting out of pensions have also remained relatively stable.
Pension participation among all employees
Data for all employees, which includes people whether they are eligible for AE or not, showed the pension participation rate was 80 percent (22.3 million) in 2023, which was similar to 79 percent (22.1 million) participation in 2022.
Further data from the annual HMRC Private Pension Statistics update showed that pension contributions had increased.
In 2022 to 2023, individual contributions made to personal pensions totalled £12.8 billion, up from £12.7 billion in 2021 to 2022.
HMRC said that £2.3 billion of individual contributions were made by self-employed members in 2022 to 2023, remaining stable from £2.3 billion reported in 2021 to 2022.
The number of members of personal pension schemes has fallen. Members making individual contributions to a personal pension dropped to 6.8 million in 2022 to 2023 from 7.4 million in 2021 to 2022.
‘No collapse in pension saving’
In response to the DWP and HMRC pension data sets, Emma Douglas, director of workplace savings and retirement at Aviva, said: “Pension saving appears to have passed one of its biggest tests since auto-enrolment was introduced in 2012.
“These official figures show no collapse in pension saving and no increase in ‘dash-for-cash’ withdrawals in 2023, despite pressures on household finances as inflation hit a four-decade high.”
She said that across all metrics, there has been no significant drop in pension participation since last year’s report.
“Different genders, ages and incomes have all shown remarkable resilience. Pension participation is at an all-time high with 22.3 million employees saving for their retirement. Fewer than 1 percent of savers made the active choice to stop saving in 2023, in line with previous years.”
‘No dash for cash’
Douglas said the same resilience has been shown by those eligible to access their pension savings, from age 55.
“The average individual made taxable withdrawals of about £15,000 in 2023. This is in line with recent years. The average single withdrawal in 2023 was about £3,000. This is also in line with previous years. This data shows no evidence of a systemic ‘dash for cash’.”
She said that more people saving for their retirement is a good news story, adding that consideration when accessing these savings should be commended.
“It’s important that pensions continue to work for all savers and Aviva therefore welcomes the government’s plans to review the UK’s pensions and retirement market. We see this as an important next step and look forward to working with government and industry on the review.”
Solid participation rate
Gail Izat, managing director for workplace pensions at Standard Life, part of Phoenix Group, said: “It’s encouraging to see that the workplace pension participation rate in the UK stayed solid at 88 percent in 2023 despite ongoing cost of living pressures through the year. AE has brought millions of people into the pension system since its introduction in 2012 and this shows that a savings habit has taken hold.
“However, we still have an under-saving issue in the UK and more needs to be done to help people secure a decent standard of living in retirement.
“Parliament passed an act aimed at lowering the age of eligibility for auto-enrolment to 18 and removing the lower earnings limit last September and, when implemented, this should boost pension participation further. We hope the new government will move quickly to progress this legislation.”
She said that longer-term, “the single biggest lever we can pull to improve retirement outcomes is to raise minimum contributions and we hope action on this will come out of the pensions review recently announced by the chancellor – part of which rightly focuses on saving adequacy”.
