UK - Firms are being urged to review their pension scheme contribution rates following the Chancellor's decision to increase National Insurance rates.
PricewaterhouseCoopers says Gordon Brown's one percentage point rise in NI contributions means that companies with contributory schemes are paying more on both salaries and pension contributions.
PwC partner Peter Tompkins said: “Whenever national insurance goes up, it is always worth asking the question whether a company is happy with the level of contribution it is paying in employee contributions.
It is important that companies ask themselves from time to time what the right level of employee contribution is.”
But Bacon & Woodrow senior actuary Raj Mody said: “The solution is not to necessarily to review pensions contributions. It is about employers sitting down and seeing that they need to reward their employees to a certain level in order to recruit and retain them.
That reward costs them a certain amount and that balance has now changed following the changes to the National Insurance framework.”
He added that some clients may take the view the extra cost is worth paying for the good of its employees.
But he warned that others may see the added costs as an extra burden which may be a further small factor towards pushing some schemes away from defined benefit to defined contribution.
He continued: “In the context of all the other factors affecting pensions, this is not a big issue. But it is part of a bigger picture about the costs of employing a workforce and providing them with benefits of different shapes and sizes.”
Tompkins added that non-contributory pension schemes are more tax efficient for employees as they do not pay National Insurance on contributions made by the employer.
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