Employees contributing to a workplace pension has risen to 73 per cent in 2017, up from 47 per cent in 2012, but contributions have remained at minimum levels, the Office for National Statistics has revealed.

Almost half, 47 per cent, of employers were contributing 2 per cent or less into DC schemes in 2017, compared to 57 per cent of private sector employees with a DC scheme.

The growth has been driven by the introduction of auto-enrolment, with almost 10 million people being automatically enrolled since its introduction in 2012, meaning 43 per cent now pay into a defined contribution pension, compared to 17 per cent in 2012.

Royal London director of policy, Steve Webb, said: “These figures show that the champagne needs to be put on ice. Nearly half all employers were contributing the bare minimum of 1 per cent of wages in 2017, and it seems likely that they will continue to contribute at the legal minimum level as contribution rates rise into 2019.

“The single most important thing that the government could do would be to ensure that when people get a pay rise they automatically increase their contribution rate unless they actively opt out.”

Furthermore, the ONS data reveals that auto-enrolment has “pulled in the young and the low-paid”, with 63 per cent of private sector workers between 22 to 29 paying into a DC pension, compared to just 16 per cent in 2012.

According to Aegon head of pensions Kate Smith, while this is proof the auto-enrolment is working, more needs to be done to raise both employer and employee contributions.

She said: “From the outset the aim of auto-enrolment was to target those who may previously not have invested in a pension and those on low income. In this respect it’s good news with the proportion of employees contributing to a workplace pension jumping by a quarter.

“While progress is good, too many people, and employers, are paying too little. There is some way to go to encourage increased contributions across the board.”

Pensions and Lifetime Savings Association deputy director of DC, Nigel Peaple, agrees, and suggests that the minimum level needs to increase to 12 per cent of salary over the course of the 2020s for retirees to be financially secure.

He said: “While the government’s phased increases will see minimum contributions rise to 8 per cent by 2019, there is a still a risk that this will not be enough to allow savers to live comfortably in retirement. We believe the minimum level needs to increase to 12 per cent of salary over the course of the 2020s if retirees are to be financially secure.”

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