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Contribution increase for occupational pension schemes shown by ONS survey

Monday, October 3, 2011

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Overall contributions to private pension saving in the UK increased by £2.4 billion to £85.6 billion in the year from 2008 to 2009, according to the country's Office for National Statistics' latest pension survey

While a £2.2 billion reduction of contributions into personal pension pots made headlines on the survey's release, this drop was more than compensated for by a £4.2 billion increase of total employer contributions into occupational pension schemes. Companies beginning to increase employee benefits again after the recession was "the main driver behind the recovery in total contributions to private pensions."

Employee contributions, on the other hand, declined in the year to 2009 in all of funded, unfunded and personal pensions, fuelling fears that the economic squeeze on household budgets is forcing people to cut down on their retirement savings.

Darren Philip, director of policy at the UK's National Association of Pension Funds said: "These trends reflect the current state of the economy and the impact this is having on UK households.

"It is understandable that people have more pressing financial priorities during difficult times, but contributing to a pension regularly is vital to ensure a decent income in retirement.

"The auto-enrolment reforms being introduced from next year are likely to result in 5-9 million people starting to save into a pension or save more. This is a key opportunity to get the country saving for its old age."

The survey confirmed that defined contribution (DC) pensions continue to have significantly lower contribution levels than defined benefit (DB) pensions. DC schemes in 2009 saw employees saving 2.9% of salary on average and employers 6.4%, while DB schemes recorded average employee contribution rates of 5.2% and employer contribution rates of 16.5% of salary.

The survey claims there were 7.7 million members of DB schemes in 2009 and 7.4 million people in DC schemes.

The Office for National Statistics' survey is based on HMRC tax returns along with a survey of occupational pension schemes.

08.09.2011

dbillingham@wilmington.co.uk