Member contributions into DC outstrips DB for the first time

Employee contributions into defined contribution pension pots outstripped defined benefit contributions for the first time, according to figures from the Office for National Statistics (ONS).

In 2018, employee contributions into DC pensions totalled £4.073bn, while contributions in DB pension pots was recorded at £3.216bn. DB contributions fell slightly over the year from £3.369bn in 2017, compared to the £1.387bn which was paid into DC.

Overall, across the board employee contributions grew by £3.044bn from 2017 to 2018.

Aegon pensions director, Steve Cameron, said: “The latest figures from ONS show the meteoric rise in DC pensions, fuelled by automatic enrolment and the huge growth in master trusts. In 2018 for the first time, employee contributions to DC outstripped those into DB pensions.”

In 2013, DC contributions totalled £0.5bn, compared to £3.604bn of DB contributions. DB contributions remained stable until 2016 when the decreased from £3.642bn to £3.369bn.

Despite this, the ONS figures show that employer contributions into DB (£17.621bn) far outstrip employer contributions into DC (£11.742bn) over 2018. Cameron believes this could change over the next couple of years too.

DC employer contributions more than doubled from £5.340bn in 2017, following the rise in employer contributions from 1 per cent to 2 per cent in April 2018.

Cameron added: “Employers are still paying more into DB than into DC, although with the continued decline in DB in the private sector and with auto-enrolment minimum contributions from employers rising from 2 per cent to 3 per cent from April 2019, we may in 2020 see DC overtake DB for employer contributions too.”

According to Aegon, the figures cover self-administered schemes’, which include master trusts but not group personal pensions, so the figure is likely to be much higher.

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