Employers paying record amounts into company pensions

Jul 13 2006 by Nic Paton Print This Article

The amount of money British employers are paying into occupational pension schemes has shot up by nearly 60 per cent since last year, as employers struggle to plug pension shortfalls, official figures have shown..

The research from the Office for National Statistics has shown that employers are now contributing eight times what employees pay.

Employer contributions to self-administered pension funds for the first quarter of 2006 were £12.2 billion, up 58 per cent, or the equivalent of £4.5 billion, on the same quarter last year.

Employee contributions remain unchanged at £1.5 billion.

While employers' regular contributions had increased (by 21 per cent over the year), most of the increase was down to employers injecting capital sums to help cover deficits, said consultancy Watson Wyatt.

These special contributions have increased by 134 per cent to £5.9 billion from £2.5 billion in the same period last year.

Stephen Yeo, a senior consultant at Watson Wyatt, said: "The rise in employer contributions is happening earlier and to a greater extent than many people expected.

"If the trend continues over the remainder of the year, £18 billion more will be paid into schemes in 2006 than in 2005, which was itself a record year for employer contributions," he added.

While such increased contributions will be welcome in helping to resolve the country's pension crisis, the question remains how to encourage more workers to contribute earlier, and put more in, to their pensions.

Just yesterday, a study by JPMorgan Invest found that young Britons were putting short-term goals or desires ahead of planning for a financially secure retirement.

And a study by Scottish Widows last month suggested that almost a quarter of Britons had no idea what their main source of income would be when they retired.