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SMEs to take a break from pensions contribution

Jan 22 2008

Many SMEs owners are contemplating taking pension contribution holidays, according to one industry expert.

Consulting agency Aon says that despite pension contribution holidays having an impact on pension deficits, the scale of such deficits has been exaggerated.

Paul McGlone, principal and actuary at Aon, claims that as pension schemes are being funded more prudently, there is a rational scheme for considering this strategy.

'There is, after all, little benefit in continuing to put additional cash into a scheme that is well funded, as once cash is in the scheme it can become trapped,' he says.

Mr McGlone concluded that a contribution holiday is one way of ensuring a scheme is not over-funded and that ultimately, as schemes become increasingly mature, financial contributions become less significant than investment strategy.

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