Watson says 80% of big UK firms offer DC
UK - Many employers are likely to review their defined contribution schemes in the next year to ensure that they are meeting employer and employee expectations, Watson Wyatt says.
Kevin Stratford, a partner at the firm, forecast the review as research by the firm found that four out of five FTSE 100 companies now provide a DC pension scheme for at least some of their employees
According to new research, 80% of FTSE 100 now offer DC pensions, for which the average maximum employer contribution amounts to 8.5%.
“This assumes full advantage is taken of any employee ‘matching’,” said the consultant in a statement.
Combined with employees' contributions, the average total contribution to DC plans is 13%.
Watson Wyatt said it has found ‘wide variations’ in areas such as design structures including occupational money purchase, group personal pensions, stakeholder and hybrids.
Differences have been spotted also in contribution rates and contribution structures like service-related, age-related, flat rate, and with or without matching contributions.
Investment options also vary from no choice to over 30 fund options, though with a median for occupational pension plans in the range of six to 10.
Employee take-up rates range from100% participation down to 2%- on average 80%. "Nearly all these DC schemes were set up over the last decade with the majority in the past five years," said Stratford.
At first these DC schemes had “few members and little in the way of assets” he added, so most employer and trustee’s attention continued to be directed at the final salary pension schemes, which they often replaced for new employees.
But now many DC plans have significant numbers of members with “sizeable assets under management”.
“For this reason - and forthcoming new regulations - many employers are likely to review their DC schemes in the next year or so to ensure that they are meeting employer and employee expectations.
“Plan governance isn't just about box-ticking, it is about best practice and ensuring that your plan remains fit for purpose."