Employer contributions to pensions top £12.2bn in first quarter of 2006

Employer contributions to occupational pension schemes in the UK have increased by nearly 60% since last year, according to new figures from the Office for National Statistics.

The statistics show that employer contributions are now eight times those made by employees.

Employer contributions to self-administered pension funds for the first quarter of 2006 were £12.2bn – up 58% or £4.5bn on the same quarter last year – while employees contributed £1.5bn.

Most of the increase is due to employers injecting capital sums to help cover deficits. These special contributions have increased by 134% from £2.5bn to £5.9bn in the same period last year. However, employers’ regular contributions have also increased by 21%.

Stephen Yeo, senior consultant at consultancy Watson Wyatt, said the rise in employer contributions was happening earlier and to a greater extent than many people expected.

“Companies and trustees are anticipating the new structure for pension funding that will apply in future, and some companies are clearly deciding to pay in much more than the minimum that many commentators expected,” he said.

“If the trend continues over the remainder of the year, £18bn more will be paid into schemes in 2006 than in 2005, which was itself a record year for employer contributions.”

But Yeo warned that the increase in contributions would not necessarily significantly reduce the risks posed to the Pension Protection Fund, because many of the companies making extra contributions are among the most secure.

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