Employers are saving up to £4.53bn a year in pension contributions as millions of employees withdraw from final salary schemes, MGM Advantage research reveals.
The retirement income firm said there are now some 2 million fewer people in defined benefit schemes than there were in 1995, as employers close schemes as part of cost saving measures.
It estimated that had these people remained in DB plans, their employers would have paid around £7.77bn a year into their pensions.
However, as many of these people have been moved into defined contribution plans, the company estimated the contribution from their employers is now around £3.24bn a year.
It said a growing number of companies are not only closing their final salary pension schemes to new employees, they are also doing this to existing staff. Many are being moved to DC schemes, where the contribution from employers is significantly lower.
MGM Advantage warned the average contribution from an employer to a DB pension is around 15.6% of a person's salary, compared to 6.5% to a DC. For someone on an average salary, this would mean a difference of around £2,266 a year.
MGM Advantage sales and marketing director Aston Goodey said: "Final salary pension schemes are moving inexorably into extinction. Employers are increasingly looking to move staff on final salary pension schemes to the cheaper option of defined contribution plans.
"Come retirement, this means that people will have smaller pensions. They need to be more focused on their financial planning and also ensure that when it comes to buying an annuity, they seek professional advice and shop around for the best deal for them."
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