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11.1%: Average Employer-Employee Contribution across Defined Contribution Pension Schemes

28/03/2015 Posted by

Survey Reveals: “Workers Will Experience Significant Pension Shock at Retirement

A major survey of 6,430 Defined Contribution pension schemes throughout Ireland, undertaken by the IAPF in advance of their annual Defined Contribution Pension Conference on Tuesday, has found that the average total contribution being paid in amounts to just 11.1% of salary – with an average of 5.7% coming from the employer and 5.4% from employees. 



According to Jerry Moriarty, CEO of IAPF, “While the average total contribution is 11.1% and the contribution levels of those in larger schemes is fairly consistent at between 8% and 15%, the survey found that those in smaller schemes, particularly those with just a handful of employees tend to buck the trend with either much larger or smaller contributions. Our survey also looked at the projected pension income that this level of contribution was likely to generate for individuals who joined the pension scheme at varying ages on differing salaries – what can be concluded from the results is that many workers in these pension schemes (even those with long service) may not achieve the comfortable retirement life they had planned unless they take more of an active role in their retirement planning and keep track of their own benefits, and ultimately do everything they can to enhance those benefits”.

The survey also revealed the following highlights

  • Over half 53% of Employers of smaller schemes (1 – 100 members) contributed less than 5% Jerry commented, “This level of funding on its own is unfortunately wholly insufficient and those involved in these schemes should consider either upping the level of contributions or looking at other retirement funding options.
  • While there’s a growing appreciation of the need to boost total contributions, only 4.5% of larger schemes contribute more than 15% in total.

Projected pension from 65 as % of final salary based on 11.1% contribution rate; 



These projected figures do not include the State Contributory Pension.

Jerry explains, “If we take typical worker retiring on a salary of €50,000 pa having joined the scheme at 35 and contributing for 30 years, they would receive a pension of just €8,500 per year, which is probably far less than they were hoping for. However the State Pension would add €12,000 per year to this figure”.

Jerry concluded, “While there has been much publicity around potential cuts in benefits for those in the traditional Defined Benefit pension schemes, those employees in Defined Contribution could face even greater pension adequacy issues; the key difference is that those in DC schemes generally have far greater control over the size of their individual pension pot and the investment options. Employees typically make up half of the contributions and many schemes offer matching upgrades where the employer will match additional contribution that the employee chooses to make. As well as an employer contribution, employees also receive tax relief on contributions.

Late entry to the pension scheme has been an issue in many companies though some employers have overcome this reluctance by making membership of the pension scheme the default option on the first day of employment – thus ensuring that new employees have to actively opt out if they don’t want it”.

Speaking of the event, David Harney Managing Director of Irish Life Corporate Business said," At Irish Life we believe the key factors affecting outcomes for Defined Contribution members revolve around starting early, putting in enough and investing appropriately. This won’t come as a surprise to people within the pensions industry but these are messages that the general public need to be familiar with".

These issues and others will be addressed at the IAPF Annual DC Conference which is being held tomorrow at 8.30am in Dublin’s Convention Centre.

The DC Conference, which is sponsored by Irish Life, will hear from David Harney of Irish Life on Pensions Adequacy, Niall O’Callaghan, Mercer on the Ideal DC Scheme, Tony Gilhawley, Technical Guidance on Overseas Transfers, Nigel Aston, SSgA on Attitudes to Pensions, Rebekah Brady, Acuvest on Innovation in Default Funds, Keith Gore, AIB on Managing the switch from DB and Robin Ellison, Pinsent Masons will give an International Perspective.

Three pension schemes will be presented with the IAPF’s Pensions Quality Standard (PQS) Award at the Conference. The PQS recognises those pension schemes that attain a certain standard which reflects qualitative contribution, communication and governance strategies for DC Schemes. The latest recipients are Airbus Financial, Oracle and Bausch and Lomb.

Note to the Editor

About IAPF 
Established in 1973, the IAPF is a non-profit, non-commercial organisation representing pension savers whose aim is to promote secure, fair and simple pensions for all.




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