Auto-enrolment continues to boost pension savings, with total contributions rising by £5bn last year. However, this is likely to be short-lived as savings are expected to slump because of Covid-19.
Data on workplace pension schemes from the Office for National Statistics revealed total contributions have risen from about £15bn in 2018 to more than £20bn last year, showing that auto-enrolment has boosted savings.
Contributions from both employees and employers into defined contribution schemes also rose rapidly as a result of auto-enrolment, reaching £6.3bn and £14.1bn respectively last year.
According to the data, contributions to DC schemes started to rise from 2015, when auto-enrolment was introduced, with employees contributions hitting £1.7bn in 2017 before it more than doubled to £4.8bn in 2018.
In comparison, employers’ contributions rose from £5.5bn in 2017 to £12bn in 2018.
The ONS estimated that total membership of DC occupational pension schemes reached 22.4m at the end of 2019.
Between the end of September and the end of December 2019, membership of DC schemes rose by 3.4 per cent.
However, this growth is expected to stall next year as many savers have opted to pull out of their DC schemes or reduce contributions due to the Covid-19 crisis.
Tom Selby, senior analyst at AJ Bell, said: “The figures for 2020 will be inevitably be hit by Covid-19, primarily because around eight million workers have been furloughed and therefore will likely have seen a reduction in their auto-enrolment contributions.
“This will only amount to a maximum of a few hundred pounds, however, and should represent a temporary blip rather than a new retirement crisis. As the UK hopefully begins to return to normality, political focus does need to shift towards building financial resilience across the system.
“This must include encouraging people to take responsibility and save over-and-above the auto-enrolment minimum where they can afford to.”