“But beneath these strong figures, the picture is more complex. A growing number of employees are now saving via auto-enrolment ‘by stealth’, driven by the frozen £10,000 earnings trigger and refined data from the ONS showing a greater proportion of higher earners—both contributing to broader coverage.
“While overall participation continues to rise, opt-out behaviour among newly enrolled savers continues to be more volatile. Specifically, the proportion of individuals who actively opted out after newly starting to save into a workplace pension has been in the range 8–10% range over the past two years; historically higher on average than in previous periods, with the overall trend of opt outs increasing over the last 10 years.”
“At the same time, auto-enrolment policy is facing an inflection point. While participation rates are commendably high, contribution levels remain far below what’s needed for most individuals to retire comfortably. Today’s figures highlight that employer contributions continue to dominate, making up 62% of total pension contributions in 2024. Meanwhile, employee contributions make up 29%, with income tax relief contributing the remaining 8%.
“The government’s plans to revive the pension commission present an important opportunity to reassess and reinvigorate auto-enrolment. Reforming contribution levels and lowering the minimum age for eligibility are logical next steps. Encouraging savings habits earlier in working life gives younger employees a better shot at long-term financial security, but reforms must be carefully calibrated to reflect the financial realities many face today.
“Equally, any increase in contribution rates must be approached sensitively to avoid overburdening employers, particularly smaller firms grappling with rising employment costs and the impact of recent National Insurance changes. A phased introduction may be necessary to allow businesses time to adapt.
“Auto-enrolment has come a long way, and with thoughtful reform, it can continue to evolve into a system that not only ensures coverage but delivers adequacy of savings.”
Personal pension statistics
“The private pension statistics released by HMRC today paint somewhat of a mixed picture of the retirement landscape in the UK. Firstly, average individual contributions to personal pensions are up 13% in the 2023/24 tax year compared to the previous one. Within this figure, self-employed pension contributions are up 17% year on year – a potential positive sign given the precarious nature of retirement provision for those in the self-employed economy. This may suggests some progress may getting made in highlighting the importance of saving for retirement.
“Indeed, the average individual contribution to a personal pension has crossed over £2,000 and have increased over the last two tax years following somewhat of a pause during the pandemic. However, the data also points to the total number of members of a personal pension scheme being fairly flat.
“Perhaps the most headline grabbing part of this release, however, is the cost of pensions tax relief, with gross income tax and national insurance relief on contributions estimated to cost the government £78.2bn. When you look at the net cost to the treasury, so after tax is paid on pension payments, it stands at £52.6bn.
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