UK employers behind in proportion of pension contributions

26 October 2017

A study of Defined Contribution (DC) provision reveals that while UK employers will offer on average 37.5% of the 8% total minimum contributions from 2019, under automatic enrolment, this is considerably lower than those provided to employees across the globe.

An international comparison of employer and employee contributions to Defined Contribution pensions was conducted by the Pensions Policy Institute (PPI), commissioned by NOW: Pensions. The report explores different factors related to, and country experiences of, employer/employee contribution balances.

Professional Pensions reports that study found Italian employers would offer 84.8% of the minimum contributions from 2019 - 47.3 percentage points higher than the burden UK employers would bear. This compared to 66.7% for Denmark, and exactly 50% for Japan.

The study also revealed the only country less generous than the UK was New Zealand, where employers would provide just 27% of total minimum contributions. Nonetheless, the same study found the figure rose to 50% for employees in New Zealand's bottom tier - the lowest employer contributions offered in its automatic enrolment scheme, KiwiSaver, are 3%.

The research was commissioned after a 2016 survey by the master trust showed just under a quarter (24%) of AE enrolled savers said they either ‘definitely will' or ‘might' opt out, when minimum contributions hit 8% of qualifying earnings in 2019. However, it also found just under three quarters (74%) of those who said they would opt out would either ‘definitely' or ‘probably' continue to save into their workplace pension if contributions were rebalanced and employers put in a minimum of 5%, with a 3% staff contribution.

The full report ‘Who pays the piper? An international comparison of employer and employee contributions to DC pensions’ can be accessed through the PPI’s website.