Pension scheme contributions hit record high in 2004
UK companies made £8 billion ($15.1 billion) of special contributions to reduce pension deficits during 2004 – an increase of nearly a quarter from 2003.
Figures released by the Office for National Statistics show that employers' total contributions to self-administered pension schemes were £25.6 billion - a record four and three quarter times as much as the £5.4 billion contributed by employees.
"Employees are now seeing the true value of their final salary pension schemes," said Stephen Yeo, a partner at global consulting firm Watson Wyatt. "On average, for every £1 they contributed in 2004, their employer paid in £4.75. Although some companies have reacted to pension scheme deficits by requiring employees to pay more, these figures show that these schemes still represent unprecedented value."
Higher life expectancy and lower expected investment returns have increased the costs of pensions in recent years, but these figures indicate that employers have been upping their contributions to meet the deficit.
For more on the UK pensions landscape, and how new legislation is impacting on corporates, see CF's UK Finance Focus in May.