The number of those opting out of workplace pensions has reduced in the last year, while the amount saved has not increased, data from the Department for Work and Pensions (DWP) has shown.

The latest update for workplace pensions from the DWP showed eligible employee participation in workplace pension schemes has reached 88% – significantly higher than in 2012, when this was measured at 55%.

The data also showed workplace pension participation remained broadly the same as that from 2019 to 2022.

In addition, 2023 data showed £132bn was saved by workplace savers in total, an increase from 2022’s figure of £123bn, and also higher than the £129bn saved in 2021.

The DWP’s data also showed £3,210 was saved per eligible employee, a slight decrease from the 2021 average data of £3,950, suggesting the last year saw an increase in the number of savers, not the amount saved per person.

Q4 data for last year also showed 8.6% of savers had opted out of their workplace pensions, a decrease compared to the first quarter of the pandemic, when 11.1% opted out.

Commenting on the DWP’s data, Broadstone senior consultant Richard Sweetman said: “It is pleasing that after a dip in workplace pension savings in 2022, probably driven by the cost of living crisis, total savings bounced back in 2023. However, this appears to be driven by an expanding population of savers rather than an increase in individuals’ payments to their pension pots, raising doubts over employees’ future retirement adequacy.

“We know that more needs to be done in terms of increasing pension contributions so that the workers of today can achieve a decent standard of living in retirement. It is promising that the second stage of the recently announced pensions review will focus on adequacy, and we hope to see concrete steps and timeline for rapidly building employees’ contributions.”

He continued: “There is never a good time for workers to see their monthly take-home pay shrink, but every year that goes by without mandating higher contributions will have an outsized impact on their total pension pot.

“It is also pleasing that while new saver opt-outs did nearly double through 2020 and 2021, they stabilised and are now beginning to decrease. Active savers stopping saving remained low throughout which, again, is a positive and a testament to the power of inertia.”

Standard Life managing director for workplace pensions Gail Izat added: “It’s encouraging to see that the workplace pension participation rate in the UK stayed solid at 88% in 2023 despite ongoing cost of living pressures through the year. Auto-enrolment (AE) has brought millions of people into the pension system since its introduction in 2012 and this shows that a savings habit has taken hold.

“However, we still have an under-saving issue in the UK and more needs to be done to help people secure a decent standard of living in retirement. Parliament passed an act aimed at lowering the age of eligibility for AE to 18 and removing the lower earnings limit last September and, when implemented, this should boost pension participation further.

“We hope the new government will move quickly to progress this legislation. Longer-term, the single biggest lever we can pull to improve retirement outcomes is to raise minimum contributions and we hope action on this will come out of the pensions review recently announced by the chancellor – part of which rightly focuses on saving adequacy.”

Aviva director of workplace savings and retirement Emma Douglas added: “Pension saving appears to have passed one of its biggest tests since AE was introduced in 2012. Today’s official figures show no collapse in pension saving and no increase in ‘dash-for-cash’ withdrawals in 2023, despite pressures on household finances as inflation hit a four-decade high.

“Across all metrics, there has been no significant drop in pension participation since last year’s report. Different genders, ages and incomes have all shown remarkable resilience. Pension participation is at an all-time high with 22.3 million employees saving for their retirement. Fewer than 1% of savers made the active choice to stop saving in the 2023, in line with previous years.

“The same resilience has been shown by those eligible to access their pension savings, from age 55. The average individual made taxable withdrawals of about £15,000 in 2023. This is in line with recent years. The average single withdrawal in 2023 was about £3,000. This is also in line with previous years. Today’s data shows no evidence of a systemic ‘dash for cash’.

“More people saving for their retirement is a good news story. And consideration when accessing these savings is also to be commended.

“It’s important that pensions continue to work for all savers and Aviva therefore welcomes the government’s plans to review the UK’s pensions and retirement market. We see this as an important next step and look forward to working with government and industry on the review.”

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