The latest data from the Department of Work and Pensions reveals that total workplace pension contributions fell for the third consecutive year.
The data also shows that UK employers contributed £38.6bn into workplace pensions last year with employees in the private sector contributing £18bn, while government tax relief accounted for a further £7bn.
These numbers, according to a Broadstone analysis, indicate that employee contributions made up 28% of their overall company pension funds.
The total annual savings, which include tax relief and payments from employers and employees, reached a peak of £66 billion in 2020 and declined to £64.4 billion in 2022. The amount contributed by employees alone was £18.3 billion in 2022, the lowest since £18.5 billion in 2018.
According to Broadstone, this could indicate a decrease in payments due to the rising cost of living, even if there was no discernible upward trend in opt-outs as indicated by the DWP numbers. The percentage of individuals who donate 6.5% or more of their income has stayed between 45 and 46%.
Broadstone’s head of DC Damon Hopkins says: “The DWP update brought mixed news on employees’ pension saving. The good news is that fears of mass opt-outs do not appear to have materialised, but contribution rates have at best flatlined and, at worst, are now in reverse, certainly in real terms.
“This may be a short-term trend as the cost-of-living crisis forces workers to cut back on their pension savings to provide additional financial headroom. Yet, it is cause for concern given savings rates were already too low and emphasises why ratcheting up contributions should be the pensions industry’s biggest focus in the coming years.
“The data is another reminder of the significant financial benefits aimed at workplace pension savers with employers and tax relief contributing nearly £50 billion a year to their pots.
“For those who have or are considering opting out of their company pension scheme, it is a reminder that a workplace pension is perhaps the closest to ‘free money’ savers can get.”
