During the 2020/21 tax year, the number of workers deciding to leave their workplace scheme per month, from 0.75 percent in 2019/20 to 0.63 percent. This means that 88 percent of eligible employees were participating in a workplace pension in the UK as of last year. Overall, total annual savings for eligible savers in the UK jumped to £105.9billion in 2020.
While the UK’s wider workplace pension scheme seems to have weathered the worst of the Covid storm, large sections of the economy do not have the same protection.
With the Government’s furlough scheme set to end, as well as other financial packages introduced in the wake of the pandemic, the disparity between the support for certain groups will widen.
Despite this, some experts agree that it is impressive that workplace pensions have remained so healthy despite challenges posed over the last 18 months.
Tom Selby, head of retirement policy at AJ Bell, commented: “There was a fear that the financial pressures caused by the pandemic and subsequent lockdown would blow a hole in people’s retirement plans.
“Despite the uncertainty facing millions of savers in 2020/21, the majority have stuck with their workplace pension, benefitting from both upfront tax relief and matched employer contributions in the process.
“Although overall many are still saving too little to enjoy a comfortable retirement, the fact that automatic enrolment held firm during the most turbulent 12-month period in living memory is hugely encouraging.”
According to Mr Selby, more issues lie ahead of the Government and economy leaders in addressing the inequalities posed by a lack of retirement options for many workers.
“The challenge is not over, however,” he added.
“The UK economy has been held together by hundreds of billions of pounds of state support, primarily provided through the furlough scheme.
“As this support is withdrawn, policymakers will need to keep an eagle eye on both the unemployment rate and any knock-on impacts on retirement saving.
“It’s also worth remembering there are millions of people, including the low paid and self-employed, who are not part of auto-enrolment, with many saving little or nothing for their financial future.
“Ensuring as many people as possible understand the importance of saving both for the short and long-term – and the potential consequences of failing to do so – must be an absolute priority for the Government, regulators and the wider pensions industry.”
Those who are self-employed can arrange for a personal pension, which is commonly known as defined contribution or “money purchase” pensions.
Money paid into a personal pension is put into investments, such as shares, by the pension provider.
Money received from the personal pension depends on how much has been paid into it, how the fund’s investments have performed and how someone has decided to take out their money.