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DC members numbers overtake DB but women lag in swings league

5 March 2020

A record number of people are saving into a workplace pension, official figures have shown, but fewer women are saving than men.

More than three quarters (77%) of UK employees were members of a workplace pension scheme in 2019, a significant increase on the 47% reported in 2012, data from the Office for National Statistics revealed.

For the first time, more employees were members of defined contribution (DC) pensions (36%) than any other type of pension in 2019, as a result of the introduction of auto-enrolment in 2012.

The ONS said the youngest employees directly impacted by the workplace pension reforms, those aged 22 to 29, have seen the biggest growth in workplace pension membership since 2012, increasing from 31% to 80%.

However, there remains a gender gap in the private sector, according to the data, with 77% of men enrolled in a workplace pension compared to 69% of women.

Tom Selby, senior analyst at AJ Bell, said the fact there are now more DC scheme members than defined benefit members was testimony both to the success of auto-enrolment and the continuing demise of final salary schemes. As such, the focus needs to be on making defined contribution schemes as attractive as possible for savers.

Selby said: “Women continue to lag behind men in both the amount they save for retirement and private sector workplace membership. This membership gap is likely, at least in part, due to more women earning below the auto-enrolment earnings trigger of £10,000, but nonetheless boosting the pensions of women should be a key focus of this and future governments.

“It is also unclear what the future holds for the auto-enrolment reforms more generally. A 2017 review proposed scrapping the ‘qualifying earnings’ bands, so every pound earned receives a matched contribution, and lowering the minimum qualifying age from 22 to 18. At the time the Government pledged to introduce these changes by the ‘mid-2020s’, although we have heard precious little since. Employers and savers will need ample notice of such changes so they have sufficient time to prepare.”

Selby said the promise to use similar behavioural nudges to auto-enrolment among the nation’s 5 million self-employed workers has also failed to deliver any practical changes, which runs the risk of creating another pensions crisis in the future.

He added: “Although the current Government has other more pressing issues to address at the moment, not least the coronavirus outbreak, setting a course for the future of auto-enrolment and pension saving more generally is crucial to build on the early successes of the reforms.

“Given the importance of this point in time, a new Pensions Commission may be needed to guide genuine long-term retirement policymaking.”

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