Pension costs affect employee pay

The cost of funding pension schemes has begun to impact employees' pay packets, according to a new study.



Research released by pension, benefits and HR consultancy Aon Consulting revealed that nearly half (49 per cent) of British firms feel that the increased cost of funding their defined benefit (DB) pension scheme has impacted negatively on the remuneration packages they can offer.

Slightly fewer companies (48 per cent) thought that the higher cost of funding DB pension schemes, which often offer a pension based on final salary, would continue to have a negative effect on remuneration packages in the future.

Meanwhile, 22 per cent of firms said that the growing cost of funding DB schemes was impacting negatively on their share price, although this was down from the 36 per cent who felt that this was the case in 2006.

Around 31 per cent of businesses said the cost of funding DB schemes was negatively affecting their ability to compete effectively, down from 50 per cent in 2006, while 30 per cent said they had had to increase the price of goods and services due to higher DB scheme costs.

Principal and senior actuary at Aon Consulting Paul McGlone said: "Based on the survey results, the message from the employers seems to be that the cost of pension deficits is most likely to be met by changes to employee remuneration, with customers being hit second, and shareholders suffering least from the pension debts."

Britons urged to bank pension contributions now

Legal & General is encouraging Britons to bank their employer's pension contributions now or risk losing out on a great savings opportunity.

The issue of pensions provision has become an increasingly important one as concerns grow that not enough Brits are saving for their retirement at a time when people are living much longer.

The group has therefore released a podcast aimed at people who are yet to join their employers' pension schemes and take advantage of the contributions on offer, telling them to "wake up and smell the coffee" before it's too late.

Adrian Boulding, wealth policy director at Legal & General, says on the podcast: "If employer pension contributions are on offer now, then bank them now because employers won't play catch up or offer higher contributions later because you didn't accept the earlier ones."

He adds that saving enough money for a comfortable retirement is a difficult task, but it can be helped with employer contributions that match those put in by employees.

NAPF expresses support for pension reforms

Leading industry body the National Association of Pension Funds (NAPF) has expressed support for many of the government's new proposals to reform pensions.

The organisation has published its response to the government's second white paper on pensions, which proposes that eligible employees will automatically be enrolled either into a low cost personal account for pensions saving or an employer-sponsored scheme.

NAPF said that it supported the government's reform package but urged ministers to make sure personal accounts serve those without access to a good workplace pension but don't undermine existing high-value pension provision.

Chief executive of NAPF Joanne Segars said that the government's reform package, auto-enrolment and mandatory employer contributions into either personal accounts or the best of today's pensions would "revolutionise pension saving".

However, the government must design personal accounts to hit the target group and provide support to existing pension provision, she added.

She said: "The good stewardship of personal accounts will be essential to encourage trust and participation. Our proposals for the structure and governance of the personal accounts regime draws on the experience and best practice of today's occupational pension schemes.

"We look forward to working closely with the government on making personal accounts a success."

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