Defined benefit (DB) pension schemes in the private sector are closing to new members at the fastest rate on record, according to research by the National Association of Pension Funds (NAPF).
The NAPF Annual survey, which was conducted among 1,018 pension schemes with a total of nine million members, found that 13% of DB schemes were open to new joiners in 2012, compared with 19% in 2011. According to the NAPF, this is the steepest fall since comparable data begain in 2005 when 43% of DB schemes were open to new members.
The survey also found that the total contributions for defined contribution (DC) pension schemes from both employers and employees reached an all-time high of 12.5% of salary in 2012.
Other survey findings include:
- Nearly 43% of private sector DB schemes are facing closure to new staff in the next five years in favour of a defined contribution (DC) scheme.
- 31% of DB schemes were closed to existing members in 2012 compared with 23% in 2011.
- 29% of DB pensions still open to future contributions from existing members are planning changes in the next few years, including possibly closing the scheme or making it less generous.
Joanne Segars, chief executive at the NAPF (pictured), said: “The pressures on final salary pensions have proven too great for many [employers].
“The growing liabilities fuelled by quantitative easing will have been a factor behind the record hike in closures.
“Those starting a new job in the private sector have next-to-no chance of getting a final salary pension. What was once the norm is now a very rare offer. And those who are currently saving into one may find it gets closed.
“While many have closed their doors, private sector final salary pensions are far from finished. More than two million workers are still saving into one and they pay the pensions of over four million pensioners. It is essential that the government shows them more support in managing some extremely testing economic circumstances.”