The average pension payment per individual is decreasing despite a hike in overall contributions, according to the latest data from HM Revenue & Customs.
Savers made an average contribution into their pensions of £2,700 in 2017/18, almost £200 less than in the previous year.
At the same time, £28.2bn was saved into personal pensions – which includes occupational scheme contributions – 3.1 per cent more than in the previous year, when it reached £27.4bn.
The number of members contributing to a personal pension has increased from 9.4m to 10.4m in 2017/18.
Employers were responsible for 66 per cent of the contributions in 2017/18. Recent rises in this area are partly due to the introduction of auto-enrolment and partly as a result of the increasing use of group personal arrangements to deliver workplace pension schemes, HMRC said.
Almost seven years after auto-enrolment was launched, minimum contributions were raised to 8 per cent in April this year – with 5 per cent being paid by employees and 3 per cent paid by their employer.
Mark Pemberthy, head of defined contribution wealth at consultancy Buck, said it was encouraging to see more people than ever participate in their workplace pension schemes, which showed auto-enrolment was having a positive impact on the overall DC pension landscape and people’s pension savings.
“However, while a greater number of employees are putting money aside for their retirement, these figures also show that most people are continuing to chronically underfund their retirement,” he noted.
Mr Pemberthy stressed that most DC schemes “are not designed to generate adequate retirement incomes and as a result most employees are not saving enough to provide the standard of living they want or expect in retirement”.
He added: “If these schemes are supposed to be the primary way for employees to save for their retirement, then contribution levels need to increase significantly.”
Research from the Pensions and Lifetime Savings Association showed earlier this month that 18m people (56 per cent) saving into a pension are not confident they are saving enough to let them live the lifestyle they want in retirement.