There are now two million fewer people in Final Salary type (DB) pension schemes than there were in 1995 according to new research from MGM Advantage.

If these two million people had remained in their plans, their employers would have paid around £7.77bn a year into their pensions.

But, according to MGM Advantage, these people are now in defined contribution schemes (personal schemes) and the contribution from their employers is now only around £3.24bn a year.

More and more companies are not only closing their final salary pension schemes to new employees, they are also doing this to existing members.

In order to save money, many employees are being moved into personal (DC) schemes, where the contribution from employers is much lower.

MGM Advantage said that the average contribution from an employer to a Final Salary pension is around 15.6 per cent of a person’s salary, compared with 6.5 per cent to a Personal (DC) plan.

For someone on an average salary, this would mean a difference of around £2,266 a year.

Aston Goodey, sales and marketing director at MGM Advantage, said: “Final salary pension schemes are moving inexorably into extinction. Employers are increasingly looking to move staff on final salary pension schemes to the cheaper option of personal or defined contribution plans.

“Come retirement, this means that people will have smaller pensions. They need to be more focused on their financial planning and also ensure that when it comes to buying an annuity, they seek professional advice and shop around for the best deal for them.”

At Premier Plus we are well positioned to help you achieve the retirement you want for yourself, but, don’t put it off, you need to start to think about it now.

Tags: pension, retirement