Answer to UK pensions' crisis lies in employer contributions

Apr 03 2006 by Nic Paton Print This Article

Employer contributions are one of the most important reasons workers join occupational pension schemes and will need to be a central part of any solution to Britain's pensions' black hole, a survey has concluded.

The research by Watson Wyatt comes ahead of the publication tomorrow of the final report of the Pensions Commission, chaired by Adair Turner, into solutions to the UK's pensions' crisis.

The Watson Wyatt study of more than 1,500 people, found more than six out of 10 felt employer contributions were the most important reason for them to join a pension scheme.

The second most important reason was the perception that a work-based pension scheme was the best way to save for retirement (26 per cent).

Other reasons given by those polled were tax incentives (seven per cent), because the scheme available was a good one (three per cent) and encouragement from friends and family (two per cent).

"The role of company contributions to pension schemes is vital and accounts for why so many stakeholder pensions without employer contributions continue to lie dormant," said Gary Smith, a senior consultant at Watson Wyatt.

The British government's response to the Turner report therefore clearly needed "to encourage and incentivise employers not only to set up pension schemes but to contribute to them," he added.

"Our research shows that if companies can be encouraged to contribute, employees are more likely to follow suit. Any approach the government takes must acknowledge and encourage the crucial role that companies already have in providing for their employees' retirement income," explained Smith.