Figures from Mercer show that after 10 years of growth, businesses have frozen levels at an average 7.2 per cent for defined contribution (DC) schemes. Similarly, employees’ payments have dropped from a median 4.6 per cent to 4.2 per cent.
Tony Pugh, European Head of DC Consulting at Mercer, said that the findings are unsurprising given the current climate. The imminent added pressures of auto-enrolment will also increase the amount firms need to pay.
“We expect, however, that rates will trend upwards again over the long term, as employers start to recognise that lowering DC contributions will change the workforce profile as a result of older employees having to work longer,” he commented.
The volatilities in the pensions market has meant that many staff are not expecting the same retirement funds as they were in 2009. Mercer has calculated that a person planning to leave employment in the near future would need to work an additional three years in order to retire on the same amount that they were anticipating in 2009.
Pugh warned that employers need to be prepared for an ageing workforce, which may prevent younger generations from moving up the career ladder.