Sarah Mortimer London

Britain’s consumer affairs watchdog is to investigate so-called defined contribution pension plans, which could attract up to 8 million new members over the next six years as part of a government drive to boost workplace saving for retirement.

The Office of Fair Trading (OFT) said yesterday that its study would focus on value for money and the size of the pension pot savers end up with at retirement. Defined contribution schemes are pension plans where the annual contribution is specified, but the future benefits are not guaranteed.

An employee’s pension is determined by the amount of money paid in, the performance of the investments made with that money, and the cost of an annuity at retirement.

The government-backed auto-enrolment scheme, where people are required to opt out rather than opt in to retirement saving, could lead to 5 million to 8 million additional workers being signed up for pensions, most of which are likely to be defined contribution pensions.

The OFT said there were currently about 4 million members of defined contribution workplace pension schemes. – Reuters