Bakery chain Greggs is tearing away from the pack by increasing its matching contribution to 7% this year, while average UK employer contributions have stagnated near the 3% mark.

“Having listened to our colleagues, we once again have increased the matched pension contribution for our wider workforce from 6% to 7% of pay as of January 2025,” the FTSE250 firm that employs over 33,000 people said. “This now aligns the pension offering for all colleagues across Greggs.” 

Since January 2024, the pension contribution for Greggs executive directors has been aligned with that for the general workforce and will also increase to 7%.

A spokesperson for the company said: “To support colleagues to save for their future, we further increased our matched contribution rates for our Greggs pension in 2025, meaning that all our colleagues can now access up to 7% employer contributions.” 

 

The increase came ahead of a tax rise on 6 April, when changes to employer national insurance made it more attractive for employers to offer part of their remuneration package through pensions salary sacrifice.

 

How have employer pensions offerings evolved? 

 

Whether Greggs is an outlier cannot be said with certainty, though it seems employers are not prone to increasing pension contributions without some regulatory stick. The Pensions Policy Institute found in 2024 that while median employer contribution rates increased as the minimum required rate of contribution went up in 2018 and 2019, they then stagnated at 3.4% – just above the minimum – between 2020 and 2022. 

Where employers are making changes voluntarily, they are often subtle. Some are taking advantage of defined benefit pension surplus to support DC members; for example, Aon has promised its UK employees that it will increase contributions by 1 point to 7.5% from 2026. 

   

   

HSBC has also improved its DC rates somewhat. Since July 2024, the bank has been contributing 10% of the first £27,300 of pensionable salary – up from £26,400 – and employer contributions are now paid up to earnings of £186,000 instead of £180,000. 

Other employers have, on the contrary, sought to reduce contribution levels in recent years, especially if these were previously generous. Last year, Schroders cut its total DC contribution from up to 20% to a maximum of 13%, halving the non-contingent part to 8%. Some large accountancy firms were consulting on slashing their contributions to 4.5% at the start of the pandemic, according to news reports, though at least one climbed down from this proposal after a staff outcry. And Union Unite previously accused supermarket chain Morrisons of wanting to reduce employer contributions while increasing employee contributions because of a possible extension of auto-enrolment. 

   

    

Most recently, employers have tended to prioritise benefits other than pensions and are also increasingly offering flexible benefits, said Mark Futcher, who heads up DC at consultancy Barnett Waddingham. How much a company contributes to pensions tends to be driven by a desire to be competitive and is typically seen as just one part of the overall benefits package, he noted. 

In light of this and the sector it operates in, the contribution from Greggs seems  generous, he said, adding: “Contributions do need to be around the 12-15% mark, so offering a matched facility up to these levels is good.” 

 

However, he highlighted some caveats around affordability with matching contribution structures, as higher matching is often taken up by higher earners and full-time workers, so companies should be aware they might be putting lower paid and part-time workers at a disadvantage.

Barnett Waddingham is currently carrying out some modelling on matching contributions, said Futcher, explaining that much depends on the starting rate: "Sometimes it’s better for companies to increase the bottom tier.”

Expressing similar concerns about affordability and low earners, the Institute for Fiscal Studies proposed last September that employers should contribute to pensions regardless of whether the employee chooses to, upending a widely held assumption that the employer contribution acts as an incentive for the employee to do the same. The IFS also proposed that minimum contribution levels should rise – but only for those on median earnings or higher, an idea that has since been taken up Nest Insight among others.

Since these proposals were published, the adequacy part of the government’s Pensions Review has been postponed indefinitely, indicating a lack of government support for raising the auto-enrolment minimum. However, the Pensions and Lifetime Savings Association said recently that it will produce some work on auto-enrolment contribution levels later this year.