UK – The UK’s growing corporate pension contributions are hitting firms’ profits and investment, according to a survey from the Confederation of British Industry.

A survey from the employers’ group showed as a result of high pension costs, 40% of firms with defined benefit schemes have cut their investment in the business itself - with some even cutting jobs.

“The added burden of spiralling pensions contributions is threatening UK firms’ ability to invest in future jobs and growth,” says CBI deputy director general John Cridland, pleading for more support from the government.

Companies put the equivalent of nearly a fifth of employees’ pay into schemes to fund future benefits and deficits – a trend which is increasing.

At the same time nearly half of the firms with DB schemes have made additional lump sum deficit payments averaging £12.6m (€18.3m).

In response companies have started closing or freezing DB schemes to existing members, instead opting for defined contribution schemes.

However, “as well as reducing risk, this addresses a potentially difficult situation of employees being on two different levels of benefits,” argues Tim Keogh, worldwide partner at Mercer Human Resource Consulting.

Also firms plan to increase members’ contributions and moving into so-called hybrid pensions schemes, combining elements of both schemes, which according to Keogh is preferable as risks are shared between employers and employees.

Both Cridland and Keogh called on the government to provide a more flexible regulatory environment for such arrangements to flourish.

“It is clear from the survey that as well as being patently unfair, the Government’s deal on public sector retirement age will hamper firms’ ability to make the necessary reforms to their own schemes,” says Cridland.

Topics