Workers not using pension schemes

Employees are not contributing enough to their pensions, a new survey has found.

16:44 25 May 2005

Employees are not contributing enough to their pensions, a new survey has found.

Origen's fifth annual survey found the number of defined benefit schemes, where employees receive a percentage of their salary as retirement income, has dropped.

But while the number of schemes being offered by companies has fallen, the advisory group blamed workers for failing to take advantage of contribution plans that did exist.

Only about 35 per cent of companies now offer such schemes, compared to 40 per cent in 2004, while about half of these are now closed to new members.

However, Origen noted that employees themselves were adding to their pension problems by failing to take advantage of schemes and not contributing enough.

The study, conducted by Income Data services, found that most workers only contribute 4.5 per cent of their earnings to the pensions pot, with employers topping that up by 6.2 per cent.

Contributions of this size are likely to yield a pension equivalent of only 14 per cent of pre-retirement income for a 40-year-old entering a scheme and retiring at 65.

"The decline in defined benefit schemes offered to employees is a continuing trend, but employees are not taking up the pensions offered to them, which is a massive concern," said Origen employee benefits director Michelle Cracknell.

"Each individual needs to take control of their own future to ensure that their expectations are met. Employees need workplace advice to help them understand they cannot simply rely on the state in their retirement."