Employers often pay more than the minimum into staff pension pots
20th November 2014 | News
Employers of UK SMEs are increasingly going above and beyond their automatic enrolment pension duties by contributing considerably more than the bare minimum.
A new CIPD survey has found that while the legal minimum requirement is that employers and employees contribute one per cent each, the average employer has increased this number to 5.6 per cent of an employee’s annual salary.
The average percentage in the private sector drops a little to 4.5 per cent; however the fact it is still four times the minimum requirement remains an encouraging sign.
Charles Cotton, performance and reward adviser, CIPD, said: “So far, pension automatic enrolment has been a success.
“It’s been the wake-up call we needed to get the UK saving for the future. Employers are in many cases going above and beyond the requirements and the majority of workers have opted to stay in the scheme.
“However, in the coming months, we need to keep a close eye on the number of workers leaving the pension scheme and what can be done to encourage them to stay.
“We also need to explore ways that we can increase the amount of money going into saving for retirement.
“To do this, it’s essential that employees are encouraged to look at their employer’s pension contribution as well as their take home pay when thinking about their total earnings.
“This is particularly important at a time when many people are experiencing either wage freezes or subdued wage growth.”
Thousands of SMEs are yet to enrol in automatic pension schemes. 48 per cent of those surveyed who are yet to enrol expect they will have to limit future pay growth in order to pay for the scheme while almost one-in-five (19 per cent) forecast a reduction in hiring and even an increase in job cuts.
Image: Simon Cunningham