UK - Many employers increased pension scheme contributions by almost 30% last year, new independent research shows.
A survey of more than 330 occupational schemes revealed contributions to 284 of them rose by 29.5% compared to 2002 and by an average of 8.6% when excluding the highest paying 16 schemes.
The findings – compiled by independent research house Incomes Data Services – show employer contributions exp-ressed as a percentage of pensionable pay also increased during 2003, the survey found.
The average contribution to defined benefit schemes went up from 10.1% at the start of the financial year to 12.2% at year end.
However, extra costs brought about by the introduction of the Pensions Protection Fund in April 2005 are expected to force employers to cut their contribution rates.
The British Chamber of Commerce director general David Frost said:
“Employers, burdened by spiralling costs will choose either to close their schemes or reduce the size of their contributions. This will mean that many employees will lose out in the long-term.”
Spiralling pension costs will continue to dampen private sector investments this year, new research shows.
The Confederation of British Industry’s latest economic forecast says scheme deficits – which stand at £160bn – will force firms to divert money from investments into contributions and one-off payments.
Earlier CBI forecasts showed additional employer contributions would rise from £8bn in 2003 to £12bn this year and £16bn in 2005.
Senior economist Lai Wahco Co said: “The immediate impact of these extra costs for businesses would be reducing their profits and the money available to spend on investments.”
This week's edition of Professional Pensions is out now.
Ben Gunnee reflects on 2018 and talks about the Fiduciary Management trends to keep an eye on in 2019
Lloyds Banking Group secured 630,000 new pension customers last year, according to its 2018 annual results.
Guy Opperman has rejected calls to speed up changes to auto-enrolment (AE) despite increasing pressure to boost contribution rates and overall savings pots.