UK pension contributions stay at 12% of salary says NAPF
Thursday, 15 December 2011 09:19
The annual report from the National Association of Pension Funds (NAPF) reveals that more and more UK companies are axing their final-salary pension schemes.
The NAPF report shows that 23 per cent of final-salary pension schemes are now shut to future contributions from both existing and new staff, up from 17 per cent in 2010 and just three per cent in 2008.
The report says that just 19 per cent of final-salary schemes are now open to new employees in the private sector, whereas in 2000, 88 per cent of final-salary pension schemes were available for new members of staff to take up.
However, the report also reveals that overall contributions have remained stable at around 12 per cent of overall salary, perhaps surprising bearing in mind the squeeze on household finances.
The figures reveal that final-salary pension schemes are increasingly viewed as too generous when taking into account the changing demographics that means people are living longer and pensions cost a lot more to fund for the average period a pensioner will require one.
This change in the pensions industry means that around 250,000 workers have been moved out of final salary schemes into defined contribution schemes. Defined contribution schemes are becoming the standard for the private sector and involve both employers and employees paying in a certain percentage of their salaries.
The NAPF’s chief executive, Joanne Segars believes that the government needs to make regulatory changes to enable companies to switch schemes in a cheaper and more efficient manner from final-salary schemes to career-average schemes.
Ms Segars said: “Demographic and financial pressures mean businesses are struggling to afford these pensions."
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