Public sector staff pay twice as much into pension pots

21 June 2017

Workers in the public sector are saving twice as much into their pensions than those in the private sector, with the gap widening over the past four years.


Figures from the Department for Work and Pensions show that public sector workers saved an average £8,418 into workplace pensions in 2016, an increase of 8 per cent from £7,811 in 2012.

By contrast, those in the private sector saved £4,098 in 2016, 38 per cent less than they did in 2012 when average contributions were £6,627.


According to a report from the Financial Times, pension experts said the gap was exacerbated by the introduction of automatic enrolment. Alistair McQueen, head of saving & retirement with Aviva pensions provider said:

“Millions of workers have been brought into saving through this policy but the minimum contributions of 2 per cent (combined employee and employer) have led to many employers levelling down their contributions from previously higher levels.

What has happened is that private sector employer contributions have been diluted by automatic enrolment whereas they have not been for 5m workers in the public sector.

Around 16m private sector workers could be headed for disappointment in retirement if they do not increase their savings rates to around 12.5 per cent,” said Mr McQueen.


According to separate ONS data, average pension contribution rates in the private sector fell from 9.6 per cent in 2012, when auto-enrolment was launched, to 3.9 per cent in 2015.

Minimum automatic enrolment contributions from both employees and employers are scheduled to rise to 5 per cent in 2018 and 8 per cent by 2019, with no current plans to increase from there. Last year the government launched a review of automatic enrolment but it did not cover contribution rates.


DWP analysis does however show that automatic enrolment has played a significant role in reversing a previous decline in membership of occupational retirement schemes with workplace pension participation; it swelled by 5.4m between 2012 and 2016 to reach 16.2m. This helped push the total amount saved into pensions in 2016 to £87.1bn, an increase of £3.8bn from 2015.


Former pensions minister Steve Webb, now head of policy with Royal London, said:

“Just five years ago in 2012, less than a third of eligible private sector workers were in a workplace pension.  The fact that this proportion had risen to nearly three quarters by 2016 is extraordinary. It is especially encouraging to see that the biggest growth has been among the under-30s.”