According to recent surveys, people will be required to pay more into their pensions as pension fund deficits continue to grow.
Whilst a report from KPMG suggests that the deficits in the pension funds of the FTSE 100 companies has increased by £15billion from 2009 to June 2010, companies say that they will continue to cut back on pension benefits. A growing number of companies are no longer able to pay off their pension deficits immediately.
According to the Association of Consulting Actuaries, a staggering 41% of employers said they were likely to reduce benefits of existing deals to meet the cost of a new scheme that would automatically enroll some workers into a company pension. Other smaller business may opt for government-sponsored schemes.
The government is in the process of reviewing the auto-enrolment plan in which companies will initially only have to pay in 1% of a worker’s earnings (rising to a minimum of 3% by 2017). The plan will see individuals contribute 4% of their salary into the scheme which will be topped with 1% by the government.
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