The crisis unleashed by the shift away from DB to DC schemes is on the verge of becoming reality acc...
The crisis unleashed by the shift away from DB to DC schemes is on the verge of becoming reality according to consultant Mercer, which says in a new report that legislation next year will for the first time bring home to all workers the actual shortfall in their pension provisions.
Until now many have been oblivious to the actual amount of money needed to retire comfortably, mainly because of the lack of information - but that is going to change.
The problem is stark: UK Employer contributions to DC plans average just 6% of salary, Mercer's figures show, which is just half the 12% it calculates is needed for schemes to meet their pension promises.
An average 45-year-old man joining a DC scheme and making contributions of 9.3% of salary could expect to receive a pension equal to 14% of his final salary on retirement at age 65, Mercer says.
That compares poorly with the expected pension under a typical 60ths DB plan equal to 33% of salary.
"This is what we feared," says Tony Pugh, European partner at Mercer.
"Contribution levels are not going up despite the increasing cost of pensions and the need for people to save more. Many will face the choice of a longer working life or a smaller retirement income dependent on the State."
And even the lowly average 6% employer contribution level is not achieved in many sectors of the economy, the consultant's report shows.
Average contributions in the food and drink, transport and publishing industries are just 4.4%, 4.6% and 4.9% respectively.
But employers may not be able to get away with such low levels of contributions in future.
A survey by Jupiter Asset Management has found that more than three million UK workers in final salary schemes are prepared to strike to preserve their pension entitlements.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation