Building on auto-enrolment’s strong foundation
Pension wealth in Great Britain is increasing. The latest figures from the Office of National Statistics (ONS)* show total private pension wealth in Great Britain was £6.1 trillion in 2016–18 – a massive 70% increase on the wealth held in the period 2006–08 (£3.6 trillion). Pension wealth accounts for 42% of all wealth in Great Britain.
The headline figures should be celebrated; people are making – or have made – provision for their later lives. But scratching the surface of the statistics reveals some interesting insights.
For example, participation is up: 53% of people are actively contributing to a private pension. This is a staggering 10 percentage points higher than the participation rate for the period 2010–12, a clear result from the introduction of automatic enrolment. But as good as this figure is, more people could be paying into a pension. It remains to be seen if the new government will review the terms for automatic enrolment to extend it to lower earners, younger people and, importantly, the self-employed.
The increase in pension wealth is not just down to more people paying into pensions. The proportion of pension wealth that comes from preserved pensions – where contributions are no longer being paid – is also creeping upwards. A large part of that is due to people moving jobs and being automatically enrolled into their new employer’s pension scheme. Over the next few years, the number of preserved pots will only increase. A pensions dashboard may help people view all their pension scheme information to get an overall picture. But the accounts will remain separate and many people are going to need more help with consolidation of pension pots in the future.
The statistics also show – unfortunately – that the gender pension gap is still there. For those under the state pension age, more men than women have private pension provision. And the value of that provision is higher: an average of £25,300 compared to £20,000 for women. The difference is starker for those aged over 65. Median pension wealth for pensions in payment for men is double that for women.
One area women appear to be faring better is participation in defined benefit pension schemes, where more women are active members than men. However, this isn’t that surprising. The vast majority of defined benefit schemes are now in the public sector, and 65% of public sector workers are women compared with 35% of men. (In the private sector, the split is 58% men and 42% women.)
More can be done to close the pension gender gap. Extending automatic enrolment will help. But so will general changes in the workplace – including better maternity provision – and factors outside the workplace as well – such as affordable childcare.
Pension wealth is an important part of Great Britain’s economic make-up. We need to now build on the automatic enrolment foundation and continue the drive upwards.
*Pensions Wealth in Great Britain: April 2016 to March 2018, ONS 5 December 2019