UK - The contributions made by FTSE 100 schemes to their pension funds have increased more than 10% in the last two years, found consultants Watson Wyatt in a recent survey.
Watson Wyatt's 2006 FTSE 100 Defined Contribution Pension Scheme Survey found the average employer's contribution had risen to 9.4% of an employee's salary - up from 8.5% in the 2004 survey. The combined average contribution is 13.7% of salary.
Two-thirds of FTSE 100 DC pension schemes are structured with "matching member contributions", which means the employer pays more if the employee contributes more than the minimum. For plans with matching member contributions, the average total employer contribution is 10.1% of salary. For schemes without it, the average employer contribution is 8.1% of salary.
Gary Smith, a senior consultant at Watson Wyatt, commented: "With a growing proportion of the workforce at many companies now members of DC plans, employes are investing more in ensuring that the pension benefits they offer meet the needs and expectations of their employees."
However, the survey also found that membership take-up rates vary enormously across FTSE 100 companies. While over half the companies have more than 80% of eligible employees joining the pension scheme, around 18% have take up rates of less than 20% of employees.
This may be due to low levels of employee engagement and awareness, said Smith. There is also anecdotal evidence of a correlation between low take up rates and a high proportion of female employees, part-time workers and/or high levels of turnover. Employers are increasingly utilising automatic enrolment, whereby employers have to decide to opt-out rather than be required to complete and return an application form in order to join the scheme. There is a clear trend for lower take up rates for companies without automatic enrolment."
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