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Leading asset management firm Fidelity International advise that companies with auto enrolment applied to defined contribution pension schemes will be less impacted by the Government’s introduction of 2012 Personal Accounts.

The Government’s introduction of Personal Accounts in 2012 could force companies to reduce the contributions they currently make to defined contribution (DC) pensions. However, Fidelity says that companies applying auto enrolment to their defined contribution pension scheme before 2012 can spread the cost impact and reduce the likelihood of having to “level down” contributions.

Personal Accounts require the auto enrolment of employees but with many companies having a fixed budget for employee benefits, the fear is that many will fund the change by levelling down the contributions they make to their employees’ pensions.
The prospect of reduced contributions is also borne out by Personal Accounts requiring companies to pay in the equivalent of 3% of salary. While this will bring workplace retirement saving to many people for the first time, it is a much lower level than the 5.8% companies currently pay into DC occupational pensions. *

Fidelity analysis took four hypothetical DC pension schemes with varying employer contribution and employee participation rates. Results show that those companies with auto enrolment in place will be better equipped to meet the costs associated with Personal Accounts without adverse impact on contribution levels.

Colin Williams, Executive Director of Defined Contribution Business at Fidelity International, says: “Auto enrolment gives more people access to retirement saving through their place of work but it comes with increased costs. With Personal Accounts on the horizon, companies who act now and introduce auto solutions will be less likely to face budgeting problems further down the line.
“If companies are thinking ahead they may also want to consider introducing auto escalation – where employees elect to place future wage increases into their pension. Fidelity’s defined contribution experience in the US suggests that auto solutions like these play a key role in overcoming inertia and increasing employee retirement readiness.” **

Fidelity International Limited (“FIL”) and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US. The FIL Organisation manages a total of £148.1 billion of assets. ***


Notes to editors:

* Office of National Statistics, 11.10.07

** Source: Building Futures VIII – Highlights of Findings, Fidelity Investments, 31.12.06
*** Source: Fidelity as at 30.09.07


For further information, please contact:

Anne Read
Fidelity International
Tel: 020 7961 4409

David Butcher
Fidelity International
Tel: 020 7074 5262

ABOUT Fidelity International:

Fidelity International Limited (FIL) is a privately-owned company, established in Bermuda nearly 40 years ago. Fidelity provides asset management services to investors across Europe, the Middle East, Africa and the Asia-Pacific region, with over 4,000 members of staff operating across the globe.

Our US affiliate, Fidelity Management and Research (FMR), serves the Americas region and is one of the USA's largest mutual fund companies. Our portfolio managers have access to detailed up-to-date analysis on companies that make up 95% of global market capitalisation.

Apart from Fidelity’s extensive capabilities in the institutional marketplace, we are well known for our range of personal investment services, such as ISAs and PEPs. In fact, we’re now the UK's largest mutual fund manager and leading provider of ISAs.

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