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Employee Benefits News

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12 Oct 2015

Employers need to double pension contributions, research finds

A new piece of research has raised concerns that employers and savers aren´t putting enough money into defined contribution (DC) schemes, the Workplace Savings and Benefits (WSB) website reports.

According to a study commissioned by Columbia Threadneedle Investments, the typical contribution to a DC pension scheme was only 6% of gross annual salary; but the Pensions Policy Institute (PPI) claims that between 11% and 14% of an employee´s salary should actually be put into their pension pots.

What´s more, if they wish to have the best chance of generating a sufficient income during their retirement, workers should start saving towards their pensions from the age of 22 – a target that many are failing to meet.

This means there is a large discrepancy between the amount that employers and staff should be saving to secure workers a comfortable retirement, and the amount that is actually being invested.

There are expected to be three million more people contributing to a DC scheme by 2030, with numbers rising from 11 million to 14 million. And as these schemes mature and develop, the same piece of PPI research found that the average DC pension pot could increase from £14,100 currently to £56,000.

Commenting on the findings, Campbell Fleming – the EMEA chief executive of Columbia Threadneedle – said that it was the responsibility of both employers and employees to ensure that investors are able to enjoy a decent retirement.

“It is up to asset managers and investment solution providers to work with savers, policy makers and trustees to make investment choices simpler and more intuitive in order to encourage engagement with sponsors early on,” he explained.

Copyright © M2 Bespoke 2015

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