The company looked at data from the Office for National Statistics (ONS) on quarterly funded commercial retirement plans, which shows DC savings are increasing. The data may hide a bad sting as it currently captures the reality of pension savings. cost of living crisis.
More than 11 million people are now actively saving in DC’s private sector programs. This is the highest number on record since this data was launched in the first quarter of 2019, and a 7% increase from the same period last year. This is because auto-enrollment is pushing more and more people into the retirement savings funnel.
In addition, more than £2bn has been invested in private sector DC pensions as employee contributions have increased recently. This is expected to increase by 12% over the course of the first quarter of 2021 as more people join the programs and start contributing.
It is well known that employees in DC private sector schemes have the greatest responsibility for their retirement savings compared to private and public savers for defined benefit pensions.
Rachel Meadows, Head of Pensions and Savings, commented, “This data paints a positive picture in early 2022, with more than 11 million active savers contributing to DC private sector plans, and contributions persist as more members join. and minimum savings are increasing.
“However, we are concerned that many plans are causing employees to reduce or withhold their retirement savings to deal with the cost of living crisis. This means that a year from now, the encouraging glow in this data will be very different. can be seen.
“Inflation-related wage increases should not reduce the percentage of their wages for workers in their pensions, which could have negative long-term effects. Some short-term relief for those facing significant income pressure from their retirement exit can be found — and for many the right choice — but it will reduce overall wealth accumulation each month, compounded by lost cumulative investment growth becomes.”
Meadows urged employees to do whatever they can to support their colleagues through the cost of living crisis and avoid the “ticking time bomb” of an income crisis in retirement.
Millie Simpson is a trainee in retirement