Employer pension contributions surge past £12bn

Employer contributions to pension schemes in the UK have increased by nearly 60% since last year, official figures have revealed.

The figures, from the Office for National 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 money to help cover pension deficits. These contributions have increased by 134% to £5.9bn from £2.5bn in the same period last year. However, employers’ regular contributions have also increased by 21%.

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

“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,” he said.

But Yeo warned that the increase in contributions would not necessarily reduce the risks posed to the Pension Protection Fund, as most companies making extra contributions had robust pension funds.

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