Workers in small firms risk inadequate pension provisions
Hard-pressed UK employees in smaller companies are not increasing contributions into their workplace pension schemes, according to a survey from the Association of Consulting Actuaries (ACA) released this week. The report, by the ACA, found average combined pension contributions by the employers and employees into defined contribution schemes had remained static since the last survey in 2010, at only 9 per cent of earnings into trust-based schemes and just over 7.5 per cent into contract-based plans.
The ACA survey had gathered responses from 344 smaller employers with 250 or fewer employees. The ACA stated that it was “alarming” as lengthening life spans and lower investment returns mean workers could face “inadequate pension outcomes.”
Andrew Vaughan, the ACA’s chairman said “At present three-quarters of the UK’s smaller firms do not offer a scheme, but ahead of 2018 we need to be firmly addressing how we can get more people to save much more so they have a sufficient income in retirement and the NEST pension scheme is vital to an employees future.”
The Government’s Pensions Commission states that two thirds of final salary is necessary for a comfortable retirement. The ACA report calculated that the individuals in the survey could reach age 67 with a pension likely to pay just 45 per cent of their final salary, which included the state pension.
For smaller firms having to auto enrol staff onto a NEST pension scheme by 2018, this may be an ideal opportunity to resolve the potential shortfall for individuals.