The decline in the number of employees with a workplace pension has been driven mainly by the fall in membership of defined benefit (DB) schemes, says the Office for National Statistics (ONS).

In 2012, membership of workplace pension schemes dropped to 46%, the lowest level since 1997. The ONS' Annual Survey of Hours and Earnings pensions summary showed that 83% of public sector employees had a workplace scheme, while only 32% of private sector employees did.

Between 1997 and 2012, membership of DB schemes fell from 46% to 28%. However for defined contribution (DC) schemes, membership fell slightly from 9% to 7% over the same period.

Joanne Segars, chief executive, National Association of Pension Funds (NAPF), said: "Workplace pensions cannot be left to fade away. This is a real low point for pensions saving, and it underlines the importance of new rules to automatically put all workers into a pension.

"We have hit this trough largely because final salary pensions in the private sector closed at a record rate last year. For many pension funds the problems created by quantitative easing will have been a factor behind the decision to close."

Segars said that it is "unnerving and unsustainable" that only a third of the private sector workforce is saving into a pension.

She added: "We hope that this is the worst things will get. Millions will be automatically put into a pension in the coming years, so the only way is up. Auto-enrolment is a great opportunity to turn the situation around and get more people saving for their retirement."

Even though membership of DB schemes has declined since 1997, 60% of employees with a workplace pension had this type of pension in 2012, compared to 15% for DC schemes and 14% for group personal pensions.

The statistics also revealed that in 2012, 91% of public sector employees with workplace pensions had a DB pension, but in the private sector only 26% of employees with workplace pensions were in a DB scheme. However, DC pensions were more common in the private than in the public sector.

In terms of contributions, 58% of employees in the public sector and 24% in the private sector contributed more than 6% of pensionable earnings.

The data for this research was collected before the auto-enrolment reforms were implemented.

First published 22.02.2013

monique_simpson@wilmington.co.uk