Private sector workforce participation in pensions now 88% finds IFS but contribution rates are low

17th November 2016

The workplace pension reforms increased pension saving by £2.5 billion per year by April 2015 according to new research from the Institute for Fiscal Studies.

This is one of the main findings of new research into auto-enrolled pensions, published today by the IFS and funded by the IFS retirement saving consortium.1 The research exploits data on almost half a million jobs from April 2011 to April 2015 to look at how contributions to workplace pensions by private sector employers and their employees have been affected by automatic enrolment.

The increase in pension saving arises from a big increase in pension membership. We find that automatic enrolment increased pension participation among those eligible by 37 percentage points, so that by April 2015, 88% of these private sector employees were members of a workplace pension scheme. In contrast, prior to automatic enrolment around half of these employees were members of a workplace pension and membership had been falling over time.

In 2012 there were around 5.4 million private sector employees who were a member of a workplace pension. By 2015 this had increased to 10.0 million. Of this increase of 4.6 million our estimates suggest 4.4 million was the result of automatic enrolment. At this point one-quarter of eligible private sector employees (3.4 million) worked for an employer that was still to be brought into the scope of the policy.

Further findings include:

Jonathan Cribb, a senior research economist at the IFS, and an author of the report says: “Automatic enrolment has been very successful in boosting membership of workplace pensions. This has been particularly true of younger employees aged 22 to 29 and relatively low earners on between £10,000 and £16,000 per year. Significant numbers of those not directly targeted by the policy have also been brought into workplace pensions, such as those earning less than £10,000. The story of automatic enrolment is certainly a case of so far so good. A key issue is whether those brought into workplace pensions at low contribution rates will remain in when minimum contribution rates start rising.”

  1. The IFS Retirement Saving Consortium comprises Age UK, Association of British Insurers, Chartered Insurance Institute, Department for Work and Pensions, HM Revenue and Customs, HM Treasury, Investment Association, Legal and General Investment Management, Money Advice Service, and Tax Incentivised Savings Association. Support from the ESRC-funded Centre for the Microeconomic Analysis of Public Policy (CPP) at IFS, grant reference ES/M010147/1, is also gratefully acknowledged.

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