Fall in employer pension contributions expected across six industries

Education is the only industry expected to see an increase in employer contributions over the next five years, while six industries are expected to see a decrease in employer pension contributions, according to analysis by Money.co.uk.

The research, based on the most recent Office for National Statistics (ONS) pensions contribution figures, revealed that six out of 16 industries are expected to see a decrease in employer pension contributions in the next five years, with five industries already experiencing a decrease in 2023.

Money.co.uk warned that only retail and motor repair are expected to have more time to prepare for a reduction in pension contributions, which is predicted to happen in 2026, while employees in the construction industry can anticipate it as early as 2023.

In particular, the research suggested that while financial and insurance activities currently receive a pension contribution of 10-12 per cent, this could reduce to 8-10 per cent, and is likely to remain at this level until 2028.

Transportation, real estate, and water supply and management pension contributions have typically been around 8-10 per cent in recent years, although the transportation and real estate sectors are expected to fall to 4-10 per cent in 2023.

Construction retail and motor repair, and administration industries are also expected to fall from the current range of 4-8 per cent to below 4 per cent, with Money.co.uk suggesting that employer contributions in these industries will revert close to the 3 per cent minimum by 2028.

Retirement funds for the accommodation and food service industry are also expected to remain at less than 4 per cent by 2028, with Money.co.uk sector pointing out that these industries have not seen an increase in employer pension contributions since 2014.

In contrast, the analysis suggested that employer contributions for the public administration industry are expected remain above 20 per cent, while the education industry is the only one expected to see an increase, with Money.co.uk predicting that it will rise from the already above-average 15-20 per cent to more than 20 per cent by 2028.

Money.co.uk personal finance expert, Lucinda O’Brien, commented: “With inflation at an all-time high in 40 years it has created a fluctuating economic environment, so that both employees and employers are impacted.

"If savings are not made outside of pension contributions, it can negatively affect retirement savings further down the line.”

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