Employer pension contributions rise by 25%

2003

Employer pension contributions have risen on average by 25 per cent over the past two years. The scale of the increase is shown by new research into employer contributions published today by Incomes Data Services.

The findings are based on the latest annual reports and accounts for more than 330 major pension schemes. Incomes Data Services said that its study showed the "vast scale of the money still flowing into pension schemes and the consequent cost pressures on companies.”

The total value of pension contributions paid by the employers covered by the survey rose to more than £6 billion in the most recent 12-month period for which figures are available this total represented a rise of 14.3 per cent on the previous year and 25 per cent over two years.

The rise reflects volatile stock markets, increased life expectancy, and the shortfall in funds caused by the pension holidays taken by many firms during the 1990s when the rising value of funds was used by some companies as an excuse to halt contributions or remove money from their fund.

More than a quarter of the additional money paid into funds was ‘special’ contributions intended to tackle deficits and fund occurrences such as early retirements, as opposed to the normal contributions paid regularly over the longer term. Normal contributions rose by less than ten per cent over the year.

The largest single additional contribution was made by British Telecom, which paid an additional £700 million into its fund on top of its regular £300 million contribution. Even so, BT says that it expects to see a shortfall of up to £2.5 billion in its fund.

But despite the jump in the level of most employers’ contributions, nearly 10 per cent of the schemes examined saw no employer contribution at all paid during the past year.

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