Third of FTSE 100 companies now use DC only, survey shows

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  • Third of FTSE 100 companies now use DC only, survey shows

UK - The number of companies in the FTSE 100 using only defined contribution (DC) pension funds has jumped to an all-time high, according to Towers Watson.

The consultancy's annual survey found that one-third of the UK's largest companies now use only DC schemes - more than double the figure reported in 2010.

The survey also found that FTSE 100 companies have largely maintained their core contribution levels, an "encouraging" sign that auto-enrolment was unlikely to influence these sponsors, according to senior consultant Amy Bell.

Towers Watson predicted that auto-enrolment would see an even greater increase in take-up rates over the next few years despite the fact nearly 70% of employers have already subscribed more than 80% of eligible employees.

The consultancy's survey also found that, on average, FTSE 100 companies provide pension schemes that allow members to achieve an average maximum matching contribution rate of 17%.

However, Bell said: "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."

Towers Watson said it had seen some "encouraging signs" on the governance front, with more than 90% of schemes monitoring investment performance.

But "more focus" is needed on the issue of retiring from DC schemes, with only half of respondents having appointed an annuity broker, it said.

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