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Employers freeze DC pension contributions

Employers have frozen pension contributions to DC schemes over the last two years due to increasing financial and regulatory pressures, according to research from consultant Mercer.

Average employer contributions have remained unchanged at 7.2 per cent since 2009, while employees have reduced contributions from 4.6 per cent to 4.2 per cent.

The UK’s largest employers are due to start automatically enrolling staff into a pension scheme from October 2012. However, the timetable for firms with fewer than 3,000 employees has been delayed following pressure from small business lobby groups.

Mercer head of DC consulting Tony Pugh says: “When considering the financial and regulatory pressures pension schemes are facing, the stagnation in employer contributions does not come as a big surprise.

“Once companies start to feel the impact of auto-enrolling swathes of employees there is even a risk of their contribution levels dropping in the short term.

“With a double-dip recession looming things are likely to get worse before they get better.”

This follows research from the Confederation of British Industry and Towers Watson suggesting just 1 per cent of employers plan to reduce pension contributions as a result of auto-enrolment.


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