The amount of money paid into defined contribution (DC) pension schemes by employees has overtaken the amount paid into defined benefit (DB) schemes for the first time in history.
“This month (April 6th) saw the biggest increase to minimum contributions to date, with the employer contribution increasing to 3% and the employee contributing 5% into their pension fund. This will no doubt propel DC contributions far higher than DB in the ONS’ report next year.”
Another reason for the disparity between DC and DB inputs is the steady decline of the generous DB schemes. Stuart explains: “DB schemes, which were once the norm, provide in most cases a far superior pension than their DC counterparts. Now, however, due to increasing life expectancy, low interest rates and scheme deficits pushing up the running costs, they are barely affordable and scarcely available to private workers.
“I’ve no doubt that the latest ONS figures are a sign of things to come and the DB contributions employees pay will continue to fall while the contributions into DC schemes grow and grow.”
Quantum Advisory specialises in pension and employee benefits services to employers, scheme trustees and members. For more information about Quantum Advisory, please visit: https://quantumadvisory.co.uk.
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