New figures from the Office for National Statistics (ONS) show that only 48% of employees were in an employer pension scheme in 2011.
This is the lowest proportion for pension scheme membership since these records were started in 1997. Back then, 55% of employees were members of a pension scheme.
The position is even worse in the private sector, with scheme membership heavily skewed to the public sector. 83% of the public sector are members of a pension scheme with only 33% of private sector employees enjoying any form of scheme membership.
Such low pension scheme membership illustrates a number of issues with provision for retirement income in the UK.
The continued closure of defined benefit (final salary) pensions in the private sector, which are often replaced with less generous defined contribution schemes, places greater responsibility for retirement funding on individual employees.
It has also placed the responsibility for making contribution and investment decisions squarely in the lap of employees.
With a defined benefit scheme, these decisions are either default or irrelevant. For defined benefit pension schemes, such as Group Personal Pensions, these decisions must be made before a pension scheme can be joined.
Whilst many employers have financial advisers in respect of their pension schemes, they typically engage with the employer rather than individual employees, failing to properly encourage high levels of pension scheme membership.
There is also the issue of financial priorities.
Pension contributions are often low down on the list of spending priorities, despite their importance in the long-term.
In order to improve pension scheme membership levels, particularly in the private sector, employers must engage with independent financial advisers to provide tailored advice to individual employees.
Even if this fails to dramatically increase the number of people with pension scheme membership, it at least ensures that every step was taken to avoid the employee from depriving themselves from a retirement in poverty.
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