UK - The average contribution to company defined contribution schemes comfortably exceeds the minimum proposed for personal accounts due in 2012 yet bigger contributions are further needed, according to Capita Hartshead's 16th annual pensions administration survey.

The survey found employees are now paying an average 4% of earnings into DC schemes, which is then topped up by an average 7% contribution from their employer, giving a total contribution of 11%.

In contrast, the proposed minimum for personal accounts is 8% of earnings between approximately £5,000 (€5,741) and £35,000 per annum.

The firm therefore warned that even at this level of contribution, DC schemes which were not supplemented by other savings were likely to deliver only modest pensions for many members, particularly for individuals with shorter savings histories, according to Capita.

"Clearly, average rates of contribution to DC schemes are too low to provide most members with a decent retirement income," said Debbie White, sales and marketing director at Capita Hartshead.

"This level could fall further if there is a mass switch to minimum contribution personal accounts. It is therefore essential that the government, the pensions industry and schools and universities work together to increase financial literacy."

This year's survey covered 288 UK pension schemes holdings assets in excess of £220bn and over 6.3 million members. The sample includes both those with in-house administration, and those who have outsourced to a wide range of third-party administrators.

At the same time as providing an overview, the survey noted there is a continued switch to DC provision on the part of employers.

In total, 47% of respondents offer DC arrangements to all employees, up from 36% in 2008. A further 33% offer DC to new employees only, while just 20% do not offer DC at all.
And nearly half of the DC arrangements covered by the survey were set up in the past five years.

The survey also found that members contribute to administration costs in almost one-third of DC schemes.

In news elsewhere, Capita was today named as the pension administration provider for the London Borough of Hounslow pension fund.

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