The number of people saving in workplace pensions has remained stable, despite the pressure on household budgets triggered by the coronavirus pandemic.
Overall, 88% of eligible employees, or 19.4 million, were participating in a workplace pension in 2020, which was similar to 2019 figures, according to the Department for Work and Pensions (DWP).
Its report said: “After years of growth in participation during the rollout of automatic enrolment, participation rates have stabilised. Trends in stopping saving and contributions have remained relatively stable during the Covid-19 period.”
The DWP said that in the financial year 2020-2021, the overall level of people stopping saving had decreased.
This was mainly driven by a fall in those stopping saving due to ending their employment.
A fall in employee contributions was observed during the first half of 2020 as the impact of lockdown started to bite, but this was followed by a recovery in the second half of last year.
Auto-enrolment was rolled out gradually from 2012 to tackle fears that many people were not saving for their old age.
Since this time, the number of eligible employees participating in workplace pensions has increased by 8.7 million.
The DWP said that there was a small gap in participation rates by gender among full-time eligible employees in 2020 (88% for male employees and 90% for female employees).
Among part-time eligible employees the gap was bigger – 86% of female part-time employees were participating in workplace pensions compared with 73% of male part-time employees.
Participation rates for eligible employees in 2020 were highest for the 40 to 49 age group (89%) and lowest for the 22 to 29 age group (85%).
Those earning between £50,000 and £60,000 showed the highest participation levels.
There was a fear that the financial pressures caused by the pandemic and subsequent lockdown would blow a hole in people's retirement plans
Tom Selby, AJ Bell
In 2020, 93% of eligible employees within this earnings band were participating in a workplace pension.
Within the public sector in 2020, the area with the highest levels of eligible employees participating in a workplace pension was Wales with 96%. The lowest participation rate of 91% was observed in London.
In the private sector, the highest participation rate was in Scotland at 89% of eligible employees. The lowest, at 85%, was in London.
Tom Selby, head of retirement policy at AJ Bell said: “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, benefiting 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 automatic enrolment held firm during the most turbulent 12-month period in living memory is hugely encouraging.
“The challenge is not over, however. 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.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “While people were tempted to decrease, or even stop pension contributions in the early days of the pandemic, it is positive to see this has not led to long-term damage with employee contributions recovering towards the end of the year.
“There is always a concern that once contributions are reduced, or stopped, they are not taken up again which can damage people’s financial resilience in retirement – it is good to see contribution levels have remained resilient in the face of Covid ”
Kate Smith head of pensions at Aegon, said: “Today’s figures highlight the huge progress made over the last 10 years in encouraging people to save for their retirement.
“Prior to auto-enrolment less than 50% of private sector employees had a workplace pension but today that figure is closer to 90%.
“The sums now being paid into workplace pensions are very significant and the combination of public sector and private sector pensions mean more than £100 billion is being put away annually.”
A DWP spokesperson said: “These statistics show trends in pension contributions have remained relatively stable over the Covid-19 period.
“While employee contribution rates slightly reduced in early 2020, these have since returned to pre-pandemic levels.”