There are now around two million fewer people in defined benefit pension schemes than there were in 1995 as employers close schemes to cut costs.
Had these people remained in DB plans, their employers would have contributed around £7.77bn a year into their pensions, according to MGM.
But the firm says the contribution from their employers is now around £3.24bn a year as many have transferred to defined contribution schemes.
The average contribution from an employer to a DB pension is around 15.6 per cent of a person’s salary, compared to 6.5 per cent to a DC scheme. For someone on an average salary, this equates to a difference of around £2,266 a year.
Sales and marketing director Aston Goodey says: “Final salary pension schemes are moving inexorably into extinction. Employers are increasingly looking to move staff on final salary pension schemes to the cheaper option of defined contribution plans.
“Come retirement, this means that people will have smaller pensions. They need to be more focused on their financial planning and also ensure that when it comes to buying an annuity, they seek professional advice and shop around for the best deal for them.”