08 January 2009
According to Alexander Forbes Financial Services employers are
wasting more than £85m annually by running trust-based DC
schemes instead of establishing alternatives such as Stakeholder or
GPPs.
Alexander Forbes found the majority of defined contribution
members are in open schemes that cost between £95 and
£160 per member to run each year.
Therefore a medium-sized occupational scheme with 5000 members,
assuming the lower management fee of £95 per person, will
cost an employer £475,000 to run each year. Across the UK DC
market the cost was estimated to be £85 million.
Alexander Forbes Financial Services director David Marlow said:
"This year, employers will need to save money wherever they can and
there will be some tough decisions ahead.
"The figure, £85m 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."
