Workers are being asked to contribute more of their salary

Members of the 100 largest company pension schemes are now having to contribute on average 5.2% of salary.

Last year, the average member contribution was 4.6% of salary.

Final salary pensions still represent an excellent deal as they can lead to a higher retirement income than money purchase schemes, Watson Wyatt added.

Companies have increased contribution rates in order to ensure that they can fund their final salary schemes in the future.

Expensive

Companies believe the upward trend in member contribution rates will continue Kathryn Armitstead, Watson Wyatt

Final salary schemes are seen as the most lucrative type of workplace pension.

They promise to pay a pension based on a combination of length of service and earnings in the final year before retirement.

But these schemes can be expensive for employers to fund and as a result increasing numbers have been closed to new joiners.

Nearly two-thirds of the companies questioned now only offer defined contribution, or money-purchase schemes to new members, in which the company makes a fixed payment into a scheme but does not guarantee what the pension will be worth on retirement.

At the same time, existing scheme members have seen their contributions rise, and the age of retirement has also been increased in some cases, with three-quarters of companies expecting their retirement age to be 65 or older within the next two years.

Among the reasons for the rising costs of occupational pensions are the increased life expectancy of those who retire, poor stock market returns, and increased regulatory costs.

"Companies believe the upward trend in member contribution rates will continue," Kathryn Armitstead, senior consultant at Watson Wyatt, said.

"We can reasonably expect the average to rise by a further percentage point to 6% over the next two years," she added.