Pensions - Articles - North South divide on employer pension contributions


 With over 11,000 firms across the country set to automatically enrol their employees into a workplace pension in July, research from NOW: Pensions reveals that those in the South appear to have won the postcode lottery when it comes to the generosity of employer contributions.

 Of the 450 small and medium sized companies surveyed, just 5% of firms in the North say they intend to pay more than the minimum employer contribution for auto enrolment compared to 11% of firms in the South and 6% of companies in the Midlands.

 However, Brummies’ luck could be changing as companies in the Midlands are the most likely to increase their employer contribution. In fact, one in six (16%) SMEs in this area have said that while they plan to pay the minimum amount initially, they will consider increasing contributions over time. This compares to 8% of firms in the South and just 5% of firms in the North.

 Thinking about auto enrolment at your company, do you intend to pay more than the minimum employer contribution?

                                                                                                                 
          North     South     Midlands
    Yes     5%     11%     6%
    No     44%     39%     36%
    Not initially but over time     5%     8%     16%
    Don't Know     46%     42%     42%

 The main reason why more than four in ten (44%) firms in the North intend to pay the minimum, is that their focus is on compliance cited by nearly half (47%), with nearly a quarter (24%) stating that keeping costs low has always been a priority for their firm.

 Of the small and medium sized companies in the South who intend to pay more than the minimum either initially or over time, nearly two thirds (62%) say it’s because they think the minimum employer contribution has been set too low for a comfortable retirement. Over half (53%) think that contributing more than the minimum will help with the recruitment and retention of employees. Two in five (40%) believe that by contributing more than the minimum, they will encourage employees to do the same.

 Of all companies that intend to contribute more than the minimum, over half (54%) haven’t decided how much more they’ll contribute while nearly a quarter (24%) say they intend to contribute 1% more than the legislative minimum. While 1% may seem like a meagre figure, over time it could equate to an additional £51,338 in the pension pot of someone on an average UK salary** so can have a significant impact on their retirement income.

 Morten Nilsson, CEO, NOW: Pensions said: “Workers are facing a postcode lottery when it comes to their retirement income. Employers in the South are taking the lead, demonstrating a long term approach to ensure their staff have the best chance of a comfortable retirement. If employers contribute even a small amount more than they are obliged to do, this can make a big difference to employees’ final pension pots.”

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