Nearly half (43%) of employers look more favourably on defined contribution (DC) schemes as a result of pension rules changes announced in the Budget, Towers Watson has said.

According to the consultancy firm's post-Budget DC Pension Strategy survey, almost two-thirds (66%) of employers think that workers will be more engaged with their retirement savings since the Budget, and 66% think employees now place more value on their DC pension.

Towers Watson said that many companies are also anticipating an increase in DC contributions from employees, with 72% expecting employees who are close to retirement to start contributing more towards their pension and 20% believe that younger workers will do the same.

Will Aitken, Towers Watson senior DC consultant, said: "We are already seeing attitudes to DC pensions change significantly since the Budget in March. Many employers are feeling more positive about offering them and are expecting that their employees will feel the same way.

"One of the biggest changes could be the anticipated increase in contributions from employees of all ages as more people feel they have more control of their retirement savings and can see the tax advantages more clearly."

However, regarding an employer's primary objective for contributing to DC schemes, only 16% said that their objective was to ensure employees had an adequate income retirement, while 65% said the primary reasons was to be market competitive.

The research also found that 30% of employers are concerned that employees will exhaust their retirement funds before they retire, while 8% said they worry that employees will run out of money in retirement.

Aitken said: "DC pensions now appear more attractive than ever before and may well attract higher employee contributions, but if the aim is for employees to have enough money to afford to retire then some kind of shift in employer attitudes may be needed to ensure that any increases in contributions are 'enough'.

"Otherwise employers may find they have a large group of older employees who cannot afford to retire when they want to."

First published 10.06.3014

monique_simpson@wilmington.co.uk