£95 per member on occupational DC ‘a waste of money’ – Alexander Forbes Financial Services

UK employers are wasting over £85 million a year on running occupational defined contribution pension schemes, according to Alexander Forbes Financial Services (AFFS).

AFFS estimates that there are 66,000 occupational pension schemes in the UK, with nearly a million members in defined contribution schemes alone. It says the large majority (80,000 members) are in open schemes, which cost between £95.00 and £160.00 per member to run each year.

It argues that this means on average, a medium-sized occupational scheme with 5,000 members, paying just the lower management fee of £95.00 per person, will still cost the employer £475,000 to run each year.

David Marlow, director, Alexander Forbes Financial Services, says: “This year, employers will need to save money wherever they can and there will be some tough decisions ahead.

“The figure, £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 benefit is a no-brainer.”