EMPLOYEE BENEFITS
Mercer publishes new survey of money purchase schemes
Average savings levels for defined contribution pension plans have increased marginally in the last two years, but for most people the current contribution rates are still inadequate to provide acceptable income levels in retirement, according to a survey by consultants William M Mercer.
The 288-company survey found that members’ contributions now average 3.5% of pay, 0.5 percentage points up on 1998. The employers’ rate has also increased, from 5.7% to 6.25%.
But Jonathan Gainsford, a European partner at William M Mercer believes that, despite this improvement, many members will not be able to maintain the same standard of living that they enjoyed whilst at work.
On average, total contribution levels for employers and employees are less than 10% of pay. A figure of 15% to 20% would be more realistic to secure adequate pensions — especially in the current environment, he said.
Key survey findings
Company contributions: The average figure masks significant variation among different business sectors: within financial services the average company contribution rate is 9.9% of pay.
Member communication: The vast majority of surveyed companies — more than two-thirds — do not automatically provide projections of individual members’ benefits.
Scheme administration: The proportion of schemes administered in-house has fallen from 20% in 1998 to just 6% last year.
Said Gainsford: Compared with defined benefit schemes, defined contribution plans are much more complex and demanding to administer. Few companies have the experience to cope in-house or can afford to deliver services comparable to what leading external providers are offering.
Want to know more?
Title: Mercer 2000 survey of defined contribution pension plans, by William M Mercer.
Methodology: The majority of companies included in this UK survey are Mercer clients and most of the information was collected by the firm’ s own consultants.
Sample size: Survey includes information from 288 UK companies.
Business sectors: The companies cover a broad range of geographical locations, sectors and sizes. Two-fifths of companies have fewer than 250 employees.
Availability: Contact your local William M Mercer office. For more details, jump to . . . www.wmmercer.com/uk/english/index.html
Take a look at a summary of the survey — see what you think . . .
http://www.wmmercer.com/uk/english/resource/resource_news_topic139.html