The majority (98%) of FTSE 350 organisations offer a defined contribution (DC) pension scheme to new employees, according to research by Willis Towers Watson.
Its FTSE 350 defined contribution pension scheme survey 2017, which is based on analysis of surveys and public data relating to the pension schemes offered by 97 organisations in the FTSE 100 and 259 organisations in the FTSE 350, also found that the median annual combined employee and employer contribution into DC pension schemes among FTSE 100 organisations is £18 million in 2017, compared to £5 million in 2009.
The research also found:
- 79% of FTSE 350 organisations have a flat rate DC contribution structure, where the same contribution design is in place for all staff. Of the 79% that have a flat rate contribution structure, 64% have some element of employer-employee contribution matching in place.
- 37% of FTSE 100 organisations have closed their defined benefit (DB) pension schemes to future accrual, compared to 29% in 2015.
- 42% of FTSE 250 organisations have closed their DB schemes to future accrual, compared to 37% in 2015.
- 54% of FTSE 100 organisations continue to offer a DB pension arrangement to existing members, compared to 84% in 2009.
- 27% of FTSE 250 organisations offer a DB scheme to existing members.
- 88% of FTSE 350 organisations that have a contract-based pension scheme default employees to the minimum contribution rate, compared to 94% with a trust-based pension arrangement.
- 15% of FTSE 350 organisations have a master trust pension arrangement, compared to 8% in 2015.
- 29% of organisations that have a contract-based scheme plan to review their members’ at-retirement options in 2017, and 12% are considering doing so in 2018.
- 26% of organisations with a trust-based scheme plan to review their members’ at-retirement options in 2017, and 5% intend to do so in 2018.
Richard Sweetman (pictured), senior consultant at Willis Towers Watson, said: “The impression we get from compiling this major survey is that the UK’s biggest employers are broadly happy with the scale of their commitment to DC pensions. However, we also see an appetite to look at ways of making arrangements work better, particularly in identifying the best vehicle for delivering DC, as seen in the emergence of master trusts; restructuring contributions to allow wider savings options; improving investment strategies; and introducing enhanced member information and support around adequacy and retirement options.
“While the ongoing cost of DB will remain a major issue for employers, this survey provides hard evidence of the speed with which DC provision is establishing a dominant role in the UK pensions landscape.”