The number of workers saving into a company pension scheme has dropped to a 15-year low, with less than 50% of employees saving for retirement.
Last year, membership of workplace pension schemes fell to 46%, according to the Office for National Statistics. However, the figure for private sector employees is significantly lower.
Just 32% of staff at private companies save into a pension. This is in stark contrast to the level of saving in the public sector, where 83% of employees have a pension.
Higher membership in the public sector is due to it having historically more generous pension schemes than the private sector, such as more final salary schemes, or defined contribution schemes that have bigger contributions from the employer.
Public sector 'aristocracy'
Dr Ros Altmann, independent pensions expert, says the data reveals that "when it comes to pensions, public sector workers remain the aristocracy".
She notes: "Whether earning high or low wages, whether male or female, old or young, those who work in the public sector have far better pension provision than those in the private sector."
The ONS data also showed that defined benefit schemes, which include final salary and average salary schemes, are continuing their downward trend. In 2012, 28% of employees had a DB pension, compared with 46% in 1997.
Most of the DB schemes are in the public sector. According to Altmann, 91% of workers in the public sector are in an employer-guaranteed defined benefit scheme, compared with just 26% of private sector workers.
Stan Russell, a retirement expert at Prudential, says the process of auto-enrolment, which will see companies automatically enrolling their staff into their pension scheme over the next few years, could help reverse the falling numbers of people saving for retirement.
David Robbins, senior consultant at Towers Watson, agrees. He comments: "Pension scheme membership has fallen sharply in recent years, but this was the final snapshot to be taken [by the ONS] before any employers were legally required to automatically enrol staff into pensions.
"From here, the only way is up but the picture will not be transformed overnight: almost half of the non-savers eligible for automatic enrolment work for small employers who have been given an extended period of grace and will only start to be brought on board after the general election in 2015."
Employees will be able to opt out of the pension scheme, but it is hoped that inertia will mean most workers remain in the scheme.
Robbins says early indications show that staff automatically enrolled into pension schemes are "overwhelmingly staying put".
This article was written for our sister website Money Observer