Employer pension contributions to top £30bn by end of year

Private sector employers will contribute more than £30bn into defined benefit (final salary) pension funds in 2006, according to conservative estimates.

Figures compiled by consultancy Aon show the figure will be at least £30.2bn in 2006 and is likely to rise to about £33.2bn in 2007. The top 200 final salary schemes will account for half of these costs this year (£15.1bn).

The statistics are based on recent past practice, which shows on average employers targeting a funding level that is not quite as strong as the regulatory standard FRS17 (which sets out what companies need to take into account when measuring the surplus or deficit of their pension schemes) and paying off debts over 15 years.

Paul McGlone, head of employer advice at Aon, warned that the figures could go highter still.

“If we look at our own research projections for 2006 and if companies target a 100% FRS17 funding level over 10 years, it’s an increase of nearly 20% rather than 10% as the respondents expect, so we can say reality is likely to be worse than expected,” he said.

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