Thursday 6th March 2008
The cost of private sector pensions rose by almost 13 per cent in a five-year period to 2007, according to a report from a thinktank.
Policy Exchange has issued a report entitled Quelling the Pensions Storm: Learning lessons from the past, in which it outlines that average total contribution rates for private sector pension schemes have risen from 15.8 per cent of earnings in 2002 to 28.7 per cent of earnings in 2007.
The report states that figures from the Association of Consulting Actuaries show that this figure is expected to stabilise at the 23.5 per cent mark in the future, a figure that would still represent an almost eight per cent increase on 2002s level.
Employers contributions to such schemes in 2006 stood at almost 19.7 billion, according to figures quoted in the thinktanks research.
Policy Exchanges report offers that if private sector schemes where employers have a certain risk are to continue to be made available to employees, "further reform is needed".
What are termed as "extra costs" have been highlighted with reference to defined benefit schemes by the report, with the pensions regulator, pension protection fund and changes to corporation tax and accounting rules all increasing administration costs for the provider.
According to the report, the impact on schemes can be seen in the number of people that are involved in such pensions. In 1995, there were 5.2 million people in private defined benefit schemes open to new members.
By 2006, a little over ten years on, this number had fallen to 1.63 million, with expectations that since then the figure has dropped below the one million mark.
In January this year, secretary of state for work and pensions Peter Hain said that the state, individuals and employers all "share in the responsibility" to avert a pensions crisis.
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