FTSE 100 employers boost contribution to defined benefits pension schemes to nearly 10% of staff salary

The average pension contribution from FTSE 100 employers to defined benefit pension schemes has increased to almost 10% of an employee’s salary, according to research.

Two-thirds of FTSE 100 defined contribution pension plans also offer “matching member contributions”, where the employer pays more if the employee contributes more than the minimum amount, the survey by consultancy Watson Wyatt showed.

The average combined employer and employee contribution to defined contribution pension schemes was found to be 13.7%.

Gary Smith, a senior consultant at Watson Wyatt, said: “There is a clear trend towards newer defined contribution schemes and those that have been recently reviewed and redesigned to have higher employer contribution rates, and we expect this trend to continue.

“With a growing proportion of the workforce at many companies now members of defined contribution plans, employers are investing more in ensuring that the pension benefits they offer meet the needs and expectations of their employees.”

The survey found that membership take-up rates vary enormously across FTSE 100 companies. While over half the companies have more than 80% of eligible employees joining the pension scheme, some 18% have take up rates of less than 20% of employees.

Smith said this strengthened the argument for the introduction of auto enrolment, where employees are required to “opt-out” of a pension scheme.

“There is a clear trend for lower take-up rates for companies without automatic enrolment,” Smith said.

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