Occupational pension scheme contribution levels are still too low to support staff in retirement

Contribution levels in the majority of occupational pension scheme are still too low to support employees in retirement, despite improvements in recent years.

According to a survey by HR consultancy Mercer, at current rates, most workers will receive more money from their state pension than they will from their occupational pension scheme.

The research looked at 400 organisations that have opted for defined contribution schemes, which have become increasingly popular since the closure of many final salary schemes.

Compared to 2002, overall contribution rates had increased slightly to 10.4% from 9.5%, with employers contributing on average 6.8%, and employees an average of 3.6%.

Tony Pugh, UK head of defined contribution pension services at Mercer, said: “Total contributions, while slightly up, still fall short of supporting decent pensions for the majority of people.

“At the current rate, most employees will get more pension through state benefits than their occupational plan, which may come as a surprise to many. The problem is more acute the higher an individual’s pay, and the older they are on joining the plan.”

More than half of individuals previously surveyed by Mercer said they expected a pension of more than half their salary on retirement. However, an average employee with 30 years’ service is more likely to receive about a quarter.

The news follows another survey this week by public service information portal Directgov, which showed more than half of adults have no idea how much money is in their pension scheme.

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