Active membership in private-sector defined contribution plans in the U.K. was up 62% on higher levels of automatic enrollment in 2016, the U.K. Office for National Statistics said Thursday.
The annual survey of private and public U.K. occupational pension plans found that the total participation was at its highest level in 2016 and represented a 17% increase from a year earlier.
Membership in private-sector occupational plans increased to 7.7 million members enrolled in these plans, and it exceeded participation in public-sector plans by 2 million, the survey said.
The average total combined contribution of employers and employees in private defined contribution plans was 4.2% in 2016, broadly in line with contribution levels in 2015.
Malcolm McLean, senior consultant at Barnett Waddingham, commenting on the survey results, said, "Overall the results are encouraging and confirm the success of auto enrollment in significantly increasing the numbers saving into a pension scheme. The next big challenge is to encourage, by whatever means, greater levels of contributions to ensure more meaningful pension provision results."
Minimum combined contributions will increase to 8% starting in April 2019 as part of the pension regulation related to the introduction of auto enrollment. The contributions were phased in three stages to eventually reach 8%.
Chris Noon, partner at Hymans Robertson, added: "The challenge now is to ensure that we don't see significant numbers opting out over the next couple of years as minimum contributions increase to 8%. Even if we can avoid high levels of opt-out, at 8% of pay, minimum contributions will not be sufficient to provide adequate incomes in retirement."
"Ideally, we need to see overall saving rates in excess of 15% of pay and begin to set expectations of working lifetimes," Mr. Noon added.
