UK employers contributed £38.6bn into workplace pensions last year, according to the latest data from the Department of Work and Pensions.
The data showed that the employees in the private sector contributed £18bn, while government tax relief accounted for a further £7bn.
Analysis by consultants Broadstone says that these figures show that employee contributions accounted for just over a quarter (28 per cent) of their total workplace pension savings.
However despite, the DWP data shows that total contributions into workplace pensions fell for the third consecutive year.
Annual savings – including employer and employee contributions as well as tax relief – peaked in 2020 at £66bn before slightly edging down in 2021 and falling to £64.4bn in 2022.
Employee contributions alone – £18.3bn in 2022 – are at their lowest level since 2018 (£18.5bn).
Broadstone says this potentially reflects reduced contributions in the face of the cost-of- living crisis, even if the DWP figures suggested little evidence of a noticeable upward trend in opt-outs. The proportion of people contributing 6.5 per cent or more of their earnings has remained broadly constant at 45 to 46 per cent.
Broadstone’s head of DC Damon Hopkins says: “The DWP update brought mixed news on employees’ pension saving. The good news is that fears of mass op-outs do not appear to have materialised, but contribution rates have at best flatlined and, at worst, are now in reverse, certainly in real terms.
“This may be a short-term trend as the cost-of-living crisis forces workers to cut back on their pension savings to provide additional financial headroom. Yet, it is cause for concern given savings rates were already too low and emphasises why ratcheting up contributions should be the pensions industry’s biggest focus in the coming years.”
He adds: “The data is another reminder of the significant financial benefits aimed at workplace pension savers with employers and tax relief contributing nearly £50 billion a year to their pots.
“For those who have or are considering opting out of their company pension scheme, it is a reminder that a workplace pension is perhaps the closest to ‘free money’ savers can get.”