A report by the Pension Fund Partnership has revealed that contributions to some types of company pension schemes are half the level of others.
Apparently, those employers that provide employees with a Final Salary (or defined benefit) pension scheme are paying around 15%. The employees themselves average around 13%. For those employers providing Money Purchase (or defined contribution) pension schemes, the contributions are said to be almost half. This news is worrying, especially because the returns at retirement from money purchase pensions are generally linked to the performance of the stock market. This is not the case with final salary schemes as employees are given a set pension and lump sum, regardless of stock market performance.
Our View
Many people do not understand the pension they have through their employer and are oblivious to the level of pension they will get at retirement. The amount you and your employer saves towards retirement will have a huge impact on your standard of living, once you stop work.
Planning for the future is vital and pensions should not be ignored.
Learn more about pensions and retirement in the Pensions Adviser.com.