One-third of FTSE 100 companies offer only DC schemes to all staff

One-third of FTSE 100 companies now offer only defined contribution (DC) pension schemes to all employees, according to research by Towers Watson.

The annual Towers Watson FTSE 100 Defined contribution pension scheme 2012 survey, which is based on 97 companies in the FTSE 100 index, found that, since the 2010 survey, FTSE 100 employers have maintained their core contribution levels.

Additional findings include:

  • FTSE 100 employers in the energy, chemical and pharmaceutical sector continue to make the highest average contributions, while the financial services sector has seen a reduction in contribution levels compared to last year.
  • Almost 70% of employers have a take-up of over 80% of eligible employees.
  • Flat or matching approaches to contributions continue to be the most popular, with three-quarters of schemes choosing these.
  • The average matching contribution from FTSE 100 companies is 17%, a 4% increase since the survey started in 2004.
  • Nearly half the companies surveyed are already auto-enrolling their employees, with a further third expecting to change their joining approach.
  • Over 90% of schemes are monitoring investment performance.
  • Only 50% of schemes have appointed an annuity broker.
  • Almost two-thirds of companies use a salary sacrifice arrangement with their pension scheme.

Amy Bell, senior consultant at Towers Watson, said: “Despite the challenging economic environment, core employer contribution rates remained the same as last year, which is encouraging and an indication that impending auto-enrolment is not likely to influence this group.

“Broadly speaking, if employers are planning to use their existing schemes as qualifying schemes for auto-enrolment, the overall average core contribution from both employers and employees is likely to need increasing from the current average of 8.7% by the end of the 2018 phasing period.

“While 50% of schemes providing access to annuity broking is an improvement on 2011’s figure of 45%, it is significant that many schemes are still not employing an annuity broker to help members get the best possible terms at retirement.

“Because the best and worst annuity rates vary by as much as 20%, appointing a broker is a relatively simple step to add real value to retiring employees’ pensions.”

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