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Pension contributions increase despite turmoil

Average contributions to UK defined contribution pension schemes have increased by 1.5 per cent over the past two years despite the recession, according to Mercer.

The firm looked at the DC pension offerings of 345 companies, representing over a million members and £10bn in assets under management.

It found since 2007 employers have on average increased their contributions from 6.8 to 7.25 per cent. Member contributions have increased from 3.6 to 4.65 per cent over the same period.
The research shows that 92 per cent of survey participants have chosen not to make any reductions to DC contributions in the near future.

Only 4 per cent are considering such changes, 2 per cent have temporarily suspended contributions and 1 per cent of employers have temporarily decreased contributions, Mercer says.
UK head of defined contribution pension services Tony Pugh says: “It is encouraging to see this increased level of commitment to DC pension provision. It reflects a maturing attitude to DC pensions as it becomes the most prevalent form of provision in the UK.
“As sponsors leave behind DB in favour of DC for new hires and, increasingly for existing employees, the need for a scheme to be successful is high on the corporate agenda. In fact, 78 per cent of participants stated that an arrangement ‘valued by employees’ was their top success factor and this, in part, could be accomplished by higher contributions.

“However, there remains much work to be done in this area as only 16 per cent of participants believed they had been successful in achieving appreciation.”



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