DC pension contributions increase in Q3 2021 as lockdown restrictions lift

Contributions to private sector defined contribution (DC) schemes increased in Q3 2021, despite similar numbers of active members, whilst the market value of pension funds rose to £2.5trn, according to data from the Office for National Statistics (ONS).

Figures from the ONS revealed that membership of private DC schemes saw little change in Q3 2021, rising from 25.3 million in June 2021 to 25.71 million, with active membership increasing from 10.65 million to 10.67 million.

However, the data showed that despite similar numbers of active members in private sector DC schemes from 30 June to 30 September 2021, employee and employer contributions during this period increased by 4 per cent and 8 per cent, respectively.

The ONS suggested that this may be a reflection in the reduction in lockdown restrictions over this period resulting in more work hours available for certain types of employment, noting that the Labour Force Survey has estimated that total weekly hours worked also increased by 3 per cent from Q2 to Q3 2021.

This is the first time that the ONS has provided a breakdown as to whether DC members are active or deferred, also revealing that from the end of December 2019 to the end of September 2020, active membership fell by 500,000 from 10.6 million to 10.1 million.

It also showed that active membership failed to return to end of December 2019 levels until the end of June 2021, when active membership was estimated to be 10.65 million.

The ONS noted that this drop in active membership coincided with the Coronavirus Job Retention Scheme (CJRS) and other associated economic impacts because of the coronavirus (COVID-19) pandemic.

In addition to the membership breakdown, the ONS figures showed that the market value of UK funded occupational pension schemes increased in Q3 2021, reaching £2.5trn at the end of September 2021, compared to 2.48trn in June 2021, whilst gross assets excluding derivatives stood at £2.7trn, up from £2.69trn in June 2021.

Furthermore, as at the end of September 2021, private sector defined benefit and hybrid (DBH) pooled investment holdings totalled £761bn, with the composition of investments via holdings taking a "balanced approach".

Commenting on the figures, Legal & General Retirement Solutions managing director, Emma Byron, said: “Workplace pension contributions have continued to bounce back following the impact of Covid-19, with employee and employer contributions increasing by 4 per cent and 8 per cent respectively in Q3 of 2021, likely due to easing restrictions at the time.

"Auto-enrolment has been a huge success, but there is much more to be done, particularly as the cost of living continues to squeeze. In such an environment, it’s important that consumers are aware of the long-term impact of their pension contributions, alongside the compound effects of investing.

"At Legal & General, we are calling for minimum auto-enrolment contributions to be increased to 12 per cent over the next few years, split equally between savers and their employers.

"There are also a great number of people who are missing out on the opportunities provided by auto-enrolment. We support a reduction in the age threshold from 22 to 18 years old and abolishing the lower earnings limit so that people can start building their retirement savings earlier.”

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