Eighty-five million pounds are wasted each year on running occupational defined contribution (DC) pension schemes rather than contract-based Group Personal Pension or Stakeholder schemes, says Alexander Forbes Financial Services (AFFS).

Eighty per cent of the estimated one million UK members enrolled in defined contribution schemes are in open ones, which cost between £95 and £160 per member to run each year. AFFS therefore estimates that a medium-sized occupational scheme with 5,000 members, paying just the lower management fee of £95 per member, will cost the employer £475,000 to run each year. The firm says that across the UK, this rises to over £85million.

Employers waste millions on defined contribution pensions"This year, employers will need to save money wherever they can and there will be some tough decisions ahead," commented David Marlow, director at AFFS. "£85 million is a very conservative estimate when you consider the additional cost of the time spent running the schemes and the potential liability on the company. Yet most schemes offer no benefits above that which a Personal Pension Plan
or a Group Personal Pension Plan would offer.

"Winding up expensive occupational schemes where the cost outweighs the benefits is a no-brainer," he concluded.

- Pensions Age January 2009

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