UK DC Participants Told to Save More

February 19, 2002 ( - UK workers in a defined contribution retirement plan are likely to get benefits that are 30% smaller those in a defined benefit program, research by KPMG Pensions shows.

In fact, according to KPMG, half of the 74 companies that sponsor a defined contribution plan are making plan payments of 5% or less per employee while those with a traditional pension are paying twice that.

That means UK workers in defined contribution programs need to step up their retirement savings in order to be properly prepared when they stop working, KPMG researchers said.

Also, the research by KPMG shows that almost nine out of ten companies with a final salary plan have seen pension costs rise in the last few years with the new accounting standard FRS17 cited as a major concern by almost 40% of companies.

FRS17 changes the reporting requirements of public UK companies for their pension and other post-retirement benefits.

The new standard requires pensions to be accounted for using the fair value approach and is in line with the accounting standards under US Generally Accepted Accounting Principles (FAS87) and International Accounting Standards (IAS19).