Defined contribution (DC) pension contributions have returned to pre-Covid levels, with employee contributions up 12 per cent in the three months to September 2020 to £1.8 billion, new ONS data reveals.
ONS statistics show employer contributions to DC schemes jumped 7 per cent to £4bn in the third quarter of 2020, up from £3.7bn in the previous quarter.
Direct investments by DC schemes I creased from £5bn to £11bn over the period.
AJ Bell senior analyst Tom Selby says: “It is hugely encouraging that, after a dip in both employee and employer pension contributions at the start of the pandemic, the amount savers are saving for retirement has quickly bounced back.
“While at this stage we do not have a clear picture of what is happening on the ground, this may in part reflect the fact some employers who furloughed staff have chosen to top-up salaries. In doing so, employees will also see their automatic enrolment pension contributions boosted.
“It is also possible the UK’s accidental savers have started to put some of the £180 billion built up as a result of lower spending during the pandemic towards their retirement.”
“As the UK slowly edges out of lockdown, it is vital those who opted out of their workplace pension due to fears over the impact of Coronavirus on their income review their decision based on their current financial situation.
“Anyone not paying into their workplace pension is missing out on both the upfront boost of tax relief and free money via a matched employer contribution.
“The vital importance of saving for our future – be that by building up a rainy-day fund or looking to the longer-term – is one of many key lessons the UK must learn from this pandemic.
“Workplace pensions are the foundation for most people, but to enjoy a comfortable retirement most people will need to go above and beyond this basic level. Furthermore, lots of people – including the self-employed – are not included in auto-enrolment and so need to take total responsibility for their retirement.”