The Confederation of Business Industry recently surveyed 230 business owners regarding the take-up of pensions by their staff. The take-up of pensions linked to a persons salary at retirement (defined benefit) was around 83%, whereas the take-up for those just based on contributions (defined contribution) was just 38%.
Our View
There is a huge difference between employees joining pensions linked to their final salary (defined benefit) than those just based on contributions (defined contribution). In our view, this is because most defined benefit pension schemes automatically enrol employees into the scheme and they physically have to opt out, if they do not want membership. With the majority of defined contribution pension schemes, employees have to opt in, rather than being automatically included.
Is this not telling us something if we want employees to save?