The minimum level of contributions specified under auto-enrolment legislation is not sufficient to boost the overall health of pension provision, and employees and employers will have to contribute more, according to the Trades Union Congress (TUC).

In a report published today entitled Pensions Scorecard 2012, the TUC said that 88 per cent of defined benefit scheme members have an employer contribution rate of 12 per cent or higher, compared to only 21 per cent in trust-based defined contribution schemes, and 13 per cent in contract-based schemes. The union added that 70 per cent of members in contract-based defined contribution schemes and 47 per cent in trust based have an employer contribution rate below 8 per cent compared to only 5 per cent of defined benefit scheme members.

The report also highlights that the restrictions on Nest concerning levels of contributions and also the transfer ban should be lifted.

Barnett Waddingham consultant Malcolm McLean said: “The uncertainty of the outcomes from defined contribution pensions is also highlighted as is the need for lower charges and better returns. Although the report doesn’t quite bring itself to say it, there would appear to be an empathy with Steve Webb’s desire to bring about a defined ambition type scheme regime – something I believe most of us now believe is desirable, if not essential, in the face of the continuing move away from tradition defined benefit schemes.”

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