Only one in ten defined benefit (DB) pension schemes now remain open as employers continue to review their pension provision ahead of 2012, according to research by the Association of Consulting Actuaries (ACA).
The 2009 ACA Pension trends survey, which involved private sector firms with combined total assets of £139billion, found 87% of DB schemes are now closed to new entrants, with one in five (18%) now also closed to future accrual – double that of 4 years ago.
Meanwhile, 59% of employers are set to review pension benefits ahead of 2012 and the incoming pension reforms, which will include the introduction of personal accounts. The research also revealed a quarter (24%) of employers will consider reducing pension benefits to offset the increased costs of having to auto-enrol all employees into a workplace scheme in 2012.
Just 6% of respondents said the government’s stated policy of supporting quality pensions is working.
ACA chairman, Keith Barton, said these are worrying times for all those looking to retire in the years ahead. “While the government’s personal accounts initiative eventually may bring on board more pension savers, it has to be remembered these accounts are designed to fill the gap with a low-level pension, where no better pension scheme exists. Quality pensions require higher contribution levels.
“Just 6% of employers responding to the survey say they feel the government’s stated policy of supporting quality workplace pensions is working, down from 38% two years ago.
“The huge public policy gap at present is meaningful action to protect good existing private sector schemes and to promote new pension designs that aim to check uncertain and volatile pension outcomes. Our survey found three-quarters of employers (76%) feel their employees are uncomfortable in taking on the entire investment, inflation and longevity risks that come with defined contribution schemes. However, this is exactly what is happening as defined benefit schemes are replaced by defined contribution [plans].”
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