The latest ‘Pension Trends’ report from the Office for National Statistics (ONS) shows that the number of people in the private sector making provision for their retirement has fallen dramatically in recent years.
In 2002, 52% of men and 41% of women were paying into a pension scheme in the private sector, these figures have now dropped significantly with only 39% of men and 28% of women making contributions.
Membership of pensions amongst self employed men has also fallen dramatically, from 64% in 1998/99 to just 38% in 2010.
Conversely, the report found that the situation in the public sector was very different, which saw male membership of pension schemes remain unchanged on 87% whilst for women it rose from 75% to 82%.
Experts believe that a number of reasons could lie behind the figures.
Firstly workers in the private sector have been hit hard by the demise of final salary pensions.
Secondly workers make have been put off contributing further to pensions which have fallen in value over recent years. Perceived lack of value for money and ongoing pension miss-selling scandals will may also have dented consumer confidence.
Finally the recent recession and ongoing tough financial climate, which has seen inflation rise significantly over recent months, will have put a drain on many household budgets with people sacrificing pension contributions to help make ends meet.
Lower paid hardest hit
Unsurprisingly it is the lowest paid who are making the least pension contribution, which could lead to increased levels of poverty amongst pensioners in years to come.
The ONS report shows that amongst those working full time on wages of less than £300 per week only 16% of men and 27% of women are paying into a pension in addition to the state pension.
Pensions Minister, Steve Webb (right) believes that the government are putting in place measures to tackle the lack of pension provision.
From 2012 all employees not in an existing work based pension scheme will be automatically enrolled into a pension and be forced to make contributions. Employers will also have to make contributions to their employee’s pensions.
Mr Webb said, “This is exactly why our radical reforms are so necessary. From next year, we will be introducing automatic enrolment – gradually making sure that people are placed into a pension by their employer.” He continued, “This will transform saving for five to eight million people who will be saving more or into a pension for the first time.”