22 Sep 2016

  • Private sector active membership on a virtual par with public sector for the first time since 2004
  • Defined-contribution saving levels are above today's legal minimums, but below the legal minimums from 2018
  • At current rates of decline, active membership of defined benefit pensions in the private sector will cease to exist in 2024
  • Aviva is hosting a high-profile summit to discuss the future of auto-enrolment on 15 November

Pension figures published today by the Office for National Statistics* demonstrate the continued success of automatic enrolment, but Aviva warns it is premature to declare victory.

Booming levels of membership

Figures suggest it is now the norm for a full-time employee to be a saver in an occupational pension scheme. There are 19.8 million full-time employees in the UK, and today's report shows that there are 11.1 million active members of occupational pension schemes. This is the highest figure since 1983.

Participation in the private sector has seen a staggering reversal of fortunes. After over 20 years of continual decline from 6.5 million in 1991 to 2.7 million 2012, the latest figures report private sector active membership now sits at 5.5million. Private sector active membership is now on a virtual par with public sector active membership, at 5.6 million. Automatic enrolment has been the major driver behind this success.

Note: The ONS figures exclude group personal pension (GPPs) arrangements. The inclusion of GPPs is likely to show that private sector participation exceeds public sector participation.

Contribution levels are above legal minimum … just

At present, automatic enrolment requires a minimum contribution of 1% of salary from the employee and 1% from the employer. Today's figures report 1.5% and 2.5% in defined contribution occupational pensions, respectively. This is 4% in total.

While these figures are above today's legal minimums, the legal minimum rises to a total of 5% in 2018 and then 8% in 2019. The ability for individuals and employers to rise to these higher figures remains untested.

The death of private-sector defined benefit pensions by 2024

Today's figures show the continual decline in the active membership of defined benefit pensions in the private sector. Today there are 1.6 million active members of private sector defined benefit occupational pensions, down from 3 million in 2006. If this rate of decline was to continue in the years to come, Aviva estimate that active membership of defined benefit occupational pensions in the private sector will reach zero by 2024. This would have significant implications for the health of retirement savings in the UK. While the average contribution in a defined contribution occupational pension scheme currently sits at 4%, the average contribution in a defined benefit occupational pension scheme currently sits at 21.2%.

Commenting on today's figures, Alistair McQueen, Saving & Retirement Manager said:

'There is a lot to be celebrated in today's pension figures. Saving in a workplace pension is now typical behaviour in the UK. If a full-time employee is not active in a workplace pension they are in the minority.

'There is however no room for complacency. Contributions today in defined contribution pensions are below the level required from 2018, and the generous defined benefit pensions in the private sector appear to be in terminal decline. While higher levels of participation represent a big step in the right direction, attention must also focus on the adequacy of savings amongst the millions who are now contributing.

'In 2017, the government will review the future of automatic enrolment. Aviva is committed to the continued success of automatic enrolment and we have launched our own Pre-Review of automatic enrolment ahead of the government's review. Levels of participation and the adequacy of savings will be considered. We will present our findings at a summit in London on 15 November. This will be led by Aviva's UK Life Chief Executive, Andy Briggs, and will be joined by leading stakeholders from across the industry, including Pensions Minister Richard Harrington MP.'

Ends

*Source: http://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/pensionssavingsandinvestments/bulletins/occupationalpensionschemessurvey/2015

If you are a journalist and would like further information, please contact:

Aviva Press Office: Fiona Whytock: 07800 692 299 or fiona.whytock@aviva.co.uk

Aviva's retirement spokesperson, Alistair McQueen, is available for comment/interview

Notes to editors:

  • Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers, across 16 markets worldwide
  • In the UK we are the leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index.
  • Aviva's asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and currently manages over £289 billion in assets.
  • Aviva helps people save for the future and manage the risks of everyday life; we paid out £30.7 billion in benefits and claims in 2015.
  • By serving our customers well, we are building a business which is strong and sustainable, which our people are proud to work for, and which makes a positive contribution to society.
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Aviva plc published this content on 22 September 2016 and is solely responsible for the information contained herein.
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