Pension contributions are flatlining

The average combined pension contributions by employers and employees to small organisations’ defined contribution (DC) pension schemes have remained the same since 2010, according to research by the Association of Consulting Actuaries.

The ACA 2012 smaller firms’ pension survey found that combined contributions into trust-based schemes have remained static at 9% of earnings. Those into contract-based DC schemes, meanwhile, have remained at just over 7.5%.

Employers respondents felt that reduced employer national insurance (NI) contributions, less ‘red tape’ and reduced corporation tax would help to increase employer’s pension contribution levels.

Reduced employee NI and income tax would also help to increase employees’ contributions according to the survey.

Andrew Vaughan, chairman at the Association of Consulting Actuaries, said: “At present, three-quarters of the UK’s smaller firms offer no pension scheme at all, but by 2018 there should be a ‘sea change’ in this situation, with all employers auto-enrolling their staff by then.

“Clearly, our economic path over the next five years will govern how many employees opt out of pensions, but ahead of 2018 we need to be firmly addressing how we can get more people to save much more so they have a sufficient income in retirement.”