FTSE 100 companies have been increasing payments to their employees’ pension pots, as contribution rates to defined contribution schemes have reached a record high, research has shown.
According to Willis Towers Watson’s annual FTSE 350 DC Pension Scheme Survey, which polled the companies in the index with DC arrangements, the pension contributions at FTSE 100 companies represented 6.5 per cent of annual salaries at the end of May, up from 5.6 per cent in 2018.
The average maximum contribution is now 17.4 per cent when combining employer and employee pension payments.
Regarding FTSE 250 companies, contributions represented 6 per cent of annual salaries at the end of May, which compared with 4.1 per cent in 2018. The highest contribution level was 14.8 per cent.
Willis Towers Watson’s research showed that FTSE 250 companies in particular have devoted more time and resources into reviewing their DC scheme contribution rates and structures.
Nearly two thirds of these (62 per cent) have taken action on their workplace schemes in the past two years, with 33 per cent considering doing so in the next two.
The number is slightly lower for the larger companies of the FTSE 100, with 48 per cent having reviewed their structure and 33 per cent looking to review.
The adoption of master trusts among FTSE100 companies increased by a third, from 15 to 21 per cent, while in the FTSE 250 the number remained stable at about a fifth.
According to Richard Sweetman, senior director at Willis Towers Watson, contribution rates have settled in recent years, but 2019 has seen a marked increase for UK DC schemes.
He said: "It’s encouraging that these employers have sought to reassess and take action on their contribution levels and the scheme’s offering as a whole, likely given impetus by the final step-up of minimum auto-enrolment contribution rates in April 2019.
"Those companies who are making the move to master trusts are, perhaps unsurprisingly, the most engaged in making their pensions as efficient and effective as possible, and are taking the opportunity to review contribution design."
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