Collapse In Private Sector Pension Saving

According to data published this week, private sector pension schemes have fewer members than at any time since records began, with only 3 million workers participating in company schemes compared to 8 million in 1967.

The Office for National Statistics (ONS) statistics reveal that only 46 per cent of UK employees had a pension scheme in 2012, compared with more than 55 per cent a decade ago.

Despite the population explosion since the 1950s, membership of workplace-based schemes in both private and public sectors fell to 8.2 million in 2011, even though membership of public sector schemes grew from 4.1 million in 1995 to 5.3 million the same year.

The widening gap between private and public sector pensions saving is worrying, as if the trend continues, the country could be heading for a “pensions catastrophe”, where the state will not be able to cope with the millions with no savings.

There is also a growing divide between those who are saving for their retirement via personal pensions and those who are not. According to the figures, fewer people overall are contributing to a personal pension, but of those who are, more is being invested. This will inevitably lead to a future of pension ‘haves’ and ‘have nots’.

Hardest hit in the savings arena are the self-employed, and men in particular, with only 34 per cent belonging to a personal pension scheme in 2011, the lowest percentage since 1991/92

However, the new auto-enrolment scheme launched for the largest employers last October may start to redress the balance. Over the next five years when smaller firms will also have to take part, the number of people automatically enrolled into a workplace pension is expected to rise to 11 million.

Meanwhile, the self-employed need to decide whether they prefer to save money now by not participating in pension saving or face a potentially miserable future when they retire.

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