Whilst auto-enrolment has brought in a significant number of new savers, the average contribution rate as a percentage of total pay for those saving was lower in 2023 than before auto-enrolment was rolled out in 2012.

Data from the Department for Work and Pensions (DWP) showed the "transformative" impact auto-enrolment has had, revealing that more than 22 million people are now saving into a workplace pension as of 2023, over 10 million more than in 2012

However, the DWP pointed out that AE has brought in new savers saving at lower contribution levels, alongside a shift from defined benefit (DB) schemes to saving into defined contribution (DC) schemes, which has brought the average contribution rates as a percentage of total pay for those saving down when compared to pre-2012 levels.

Median total contribution rates as a percentage of total pay are currently around 8 per cent, which is the minimum level required under auto-enrolment, with both employees and employers contributing around 4 per cent of total pay on average.

According to the DWP, around three in 10 (4.3 million private sector DC employees out of a total of 14.2 million private sector DC savers) are saving at the AE minimum level, while around one in two (7.5 million private sector DC employees out of a total of 14.2 million private sector DC savers) are saving at or below 8 per cent of total pay.

The DWP suggested that there is also a clear relationship between earnings and pension saving levels, as those on lower incomes are more likely to be saving at AE minimum levels.

In particular, it found that 48 per cent of those earning £10,000 to £20,000 per year are saving at AE minimum levels compared to 12 per cent of those earning £60,000 to £70,000.

When looking at those saving 8 per cent or less of total pay, around three quarters of low earners are saving at these levels compared to only one in four for higher earners.

The DWP's analysis also included further insight specifically focused on pension saving trends amongst those earning below £10,000 per year, revealing that around 2.5 million private sector employees in 2023 earned less than £10,000 a year, and, of these, only around one in four were saving into a workplace pension.

The DWP pointed out that there are notable characteristics of those earning less than £10,000, with a higher proportion of women (69 per cent) compared to all employees, as well as a higher representation of younger people.

Whilst the research suggested that the lowest earners are less likely to be undersaving when measured against Target Replacement Rates (TRR), the DWP admitted that low earners are more likely to miss Pensions UK's Retirement Living Standards.

According to the research, 47 per cent will miss the “minimum” standard of retirement (estimated at an income of around £13,000 a year), 95 per cent will miss the “moderate” standard (around £32,000 a year) and 98 per cent will miss the “comfortable” standard (around £44,000 a year).

Earning levels were not the only impacting factor, as those working for smaller employers are also more likely to be saving at minimum levels, whereas those working for larger employers are more likely to benefit from higher employer contributions.

The DWP found that over half (53 per cent) of private sector DC savers working for an employer with four employees or less are saving at automatic enrolment minimum levels compared to 20 per cent of those working for employers with 250 to 4,999 employees.

Industry differences were also seen, as employees working in sectors such as hospitality (55 per cent) are more likely to save at the automatic enrolment minimum required level compared to sectors such as Finance and Insurance (5 per cent).

However, the DWP found that average contribution levels by age do not vary substantially, although those aged 22 to 25 are slightly more likely to be saving at minimum levels (35 per cent) compared to older age groups.

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