Employee and employer contributions to defined contribution (DC) pension schemes declined by 11% and 5% between Q1 and Q2 last year respectively, as per data from the Office for National Statistics (ONS).

The ONS figures, which focused on UK-based funded occupational pension schemes from October 2019 to June 2020, revealed total pension payments and income withdrawal from funded occupational pension schemes decreased by 4% from April to June last year, compared to October to December the year before.

That said, there was a 5% rise in lump-sum benefits paid by pension schemes during the same timeframe, says an Employee Benefits report.

Last year, there were 23 million DC scheme members, in comparison to 22.4 million members at the end of 2019.

During the first six months of 2020, membership in total defined benefit and hybrid (DBH) occupational pension schemes increased from 18.3 million to 18.4 million in June 2020.

Furthermore, private sector DBH schemes registered an 18% drop in staff contributions to £0.2 billion in 2020, from £0.3 billion in the previous year.

There was a similar fall in public sector DBH schemes of 17%.

In addition, total pension payments and income withdrawal from funded occupational pension schemes were £13.2 billion in Q2, a 4% drop since the end of 2019.

A 5% rise was also reported from 2019 in total lump sums from pension schemes to £2.7 billion in the second quarter of 2020.
According to Kate Smith, head of pensions at Aegon: “The latest ONS statistics clearly show what we had all suspected – a dramatic fall in pension contributions directly linked to the pandemic. Employer auto-enrolment duties continue for all eligible employees, including furloughed employees during this time, so the good news is that contributions continued to be paid during this time for many.
“But the impact of lower furloughed wages and job losses has been clearly demonstrated with a dramatic 11% drop in employee contributions and a 5% fall in employer contributions between the first and second quarters of 2020. This does not include contributions payable to contract-based schemes, which is most likely experiencing a similar trend. But alarmingly these figures represent just the start of a trend, as furlough has continued and job losses are increasing. The longer-term impact of this could seriously affect the financial wellbeing of some people by putting a massive dent in people’s retirement plans and ability to save for the future,” she added.
Ms Smith went on to say: “Initial figures showing payments and income withdrawals have fallen slightly in the first half of 2020 are encouraging, showing that the staff aged over 55 have been cautious when accessing their pension pot while values are depressed. But the picture may well have changed in the second half of 2020 as the pandemic continued. Pensions are designed to provide an income throughout retirement and reducing the amount of income withdrawn during a period of investment market downturn could be important for the longevity of the pension pot.”