2. The UK may be chronically under saving in workplace pensions
The UK is a country of pension haves and have nots – and nothing shows that better than this chart, produced by the New Financial think-tank this week.
It shows the equivalent percentage of salary being contributed to workplace pensions for people in different part of the labour market. It then breaks down how much comes from individuals themselves, and how much from their employer.
The biggest contributions come in the public sector – for those in the NHS and Local Government Pensions Scheme (LGPS). These are, of course, ‘defined benefit’ (DB) schemes where retirement income is guaranteed and worked out as a proportion of earnings.
They look very generous indeed when compared to the average private sector scheme, most of which are ‘defined contribution’ (DC), where income depends on what’s paid in and what investment return is achieved.
Bottom of the pile is those contributing the minimum in auto-enrolment (AE) schemes, the default for workers if their employers doesn’t choose to offer them a more generous scheme.
This isn’t a story about overgenerosity to the public sector (who may well complain a big pension is scant compensation for lower regular pay). It’s a story of chronic under-saving elsewhere.
Selected pension contribution rates in the UK
