Employers pay record amounts into DB pension schemes

Employers paid record amounts into defined benefit (DB) pension schemes in 2012, according to research by the Office for National Statistics (ONS).

An analysis of the ONS’ Annual survey of hours and earnings, by consultancy Towers Watson, revealed that:

  • Total employer contributions to self-administered pension funds rose from £39 billion in 2011 to £45 billion in 2012.
  • In cash terms, contributions were more than three times higher in 2012 than they were ten years earlier (£14 billion in 2002).
  • The majority of this money is paid to DB schemes, predominantly those sponsored by private sector employers. 

Mark Duke, a senior consultant at Towers Watson (pictured), said: “Employers are paying more and more money into their DB schemes even though the number of employees still in them is getting smaller and smaller. 

“Despite these huge payments, many organisations are still finding that their pension deficits are not getting any smaller, partly because of today’s very low interest rates.

“With plans to repair deficits having been blown off course, employers and pension scheme trustees face challenging negotiations over what to do about this.

“More money spent shoring up pension benefits promised in the past can mean less money available for wages, dividends and investment in the organisation.”