Contributions into smaller firms’ pension schemes are flatlining, according to a survey from the Association of Consulting Actuaries (ACA).
The ACA said its survey of 344 firms with 250 or less employees showed that contributions levels into defined contribution pensions stand at 9% of earnings into trust-based schemes and 7.5% into contract-based plans. This is static from the levels found in the ACA’s last survey of the sector, conducted in 2010.
The survey also showed firms believed financial incentives, such as reducing national insurance contributions and red tape, were crucial to increasing contribution levels.
The ACA said the figures were ‘alarming’ given lengthening life spans and lower investment returns. It called on the government to raise the 8% contribution minimum level under auto-enrolment.
‘We hope the higher single-tier state pension reform will go ahead and provide a sustainable ‘core’ income in the years ahead, but on top of this we need to save much more than 8% of ‘band earnings’ for a comfortable retirement with less reliance on state support,’ said ACA chairman Andrew Vaughan.
‘I would like to see the government and opposition pledge to raise minimum pension contributions on band earnings to 10% by 2015 and 12% by 2020, but with pledges to cut national insurance, ear-marking reductions so they support extra private pension savings. If we do not increase these minimum contributions, then government ambitions to hold down state welfare costs are unlikely to materialise – indeed, the pressure will be in the other direction.’
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