NAPF Investment Conference: Employers urged to provide adequate DC contribution rates

Employers with defined contribution (DC) schemes have been urged to ensure that combined pension contribution rates come to 15%-20% of salary so that employees receive an adequate retirement fund.

Delegates at the National Association of Pension Funds (NAPF) Investment Conference were also encouraged to target communication about their pension schemes at specific employee groups so that messages contained relevant information and encouraged take up.

In a session entitled ‘Moving DC Forward’, Todd Rupert, president and chief executive officer of T. Rowe Price Global Investment Services, said: “The employer should be an enabler and an educator to employees because most people do not know what to do [about their pension].

Rupert added that the success of DC schemes is dependent on a number of factors, including adequate contribution rates, the provision of appropriate default funds, effective financial education, auto-enrolment, personalised messages for staff, adequate contribution rates, and retirement income in the form of monthly income for pensioners rather than a lump sum payment.

The DC environment in the UK was compared with that in the US†and Denmark where DC pension schemes are more established.

Torben Moger Pedersen, chief executive officer at danish pension fund PensionDanmark said that in Denmark, for example, it was not unreasonable to expect that an employee currently under 25 years of age would be able to enjoy 63% of their salary upon retirement while in the US, auto-enrolment had resulted in increased employee participation in pensions.