Pension contributions too low in small firms

Hard-pressed staff in smaller companies are not increasing contributions into their workplace pension schemes, according to a survey from the Association of Consulting Actuaries.

In companies with fewer than 250 staff, average pension contributions have remained static since the last survey was conducted at just 9 per cent of earnings. The ACA said this was "alarming" as lengthening life spans and lower investment returns mean workers face "inadequate pension outcomes".

At this rate, the ACA calculates workers could reach age 67 with a pension likely to pay just 45 per cent of their final salary – including the state pension. This is comfortably below the two-thirds of final salary recommended by the Government's Pensions Commission as necessary for a comfortable retirement.

But there may be good news on the horizon with smaller firms having to auto enrol staff onto a pension scheme by 2018.

"At present three-quarters of the UK's smaller firms do not offer a scheme, but ahead of 2018 we need to be firmly addressing how we can get more people to save much more so they have a sufficient income in retirement," said Andrew Vaughan, the ACA's chairman.