The move away from defined benefit towards defined contribution pension schemes continues as employers seek more cost-effective options
The demise of defined benefit (DB) pension schemes and employers’ move to defined contribution (DC) plans has been well documented. This trend can be tracked through Employee Benefits’ pensions research over the last 12 years. In our Pensions strategy research 2000, for example, 39% of respondents offered a DB scheme to all staff and 21% to some staff, making these the two most commonly offered types of scheme. A further 20% offered a trust-based DC scheme to all staff and 12% to some, while 18% provided a group personal pension (GPP) for all employees and 11% did so for some.
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Five years later, however, the Employee Benefits Pensions research 2005 found that the percentage of respondents offering a DB scheme to some or all staff had fallen to 43%, while more than three-quarters (76%) offered a DC plan to some or all of their staff . Of the latter group, 51% offered a GPP, 34% a stakeholder scheme and 28% a trust-based money purchase plan.
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Although the figures have fluctuated slightly since 2005, the overall picture of the market has not changed, with employers continuing to off er contract-based DC schemes as their main pension plan(s). These are seen as the most cost-effective option, shifting many of the risks away from the employer and on to the employee.
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Read more from Employee Benefits Pensions and Workplace Savings Research 2012