The first report of the Association of Consulting Actuaries’ (ACA) survey on pension trends has found that 87% of defined benefit (DB)†schemes are now closed to new entrants.
The ACA pensions trends survey, of 309 employers with assets exceeding £138 billion, also found that 18% of those schemes closed to new joiners were also closed to future accrual.
A third of DB schemes are still subject to review with the latest changes likely to impact on existing members.
In addition, the findings showed that:
- 39% of defined benefit schemes were presently considering changes to future accrual, with 35% considering a move to career average and 22% a move to defined contribution – changes that will now impact mainly on existing employees.
- 76% of employers felt their employees were uncomfortable in taking on the investment, inflation and longevity risks inherent with defined contribution schemes.
- An even higher proportion (81%) felt employees were not capable of determining how they should manage defined contribution saving.
- Reflecting this concern, 77 % of employers said that present legislation did not allow them to easily share investment, inflation and longevity risks with employees.
- A similar number (76 %) said public policy should be more supportive of designs that would free up the way employers offer pensions to employees.
These sorts of designs would enable employers to hold down pension costs by, for example, holding back or removing compulsory indexation of benefits, whilst continuing to provide the greater stability and certainty of benefits that accrue under defined benefit arrangements.
ACA chairman, Keith Barton, said: “This latest survey confirms all our worst fears about the loss of quality pension schemes and how this is now moving on to a phase where future benefits for existing members are likely to be pinned back as employers struggle to hold down costs within existing legislation.
“It is very clear from the survey that employers do not think employees want to take on the risks inherent with defined contribution. If we are to preserve as much private sector defined benefit provision as possible then the Government must act during 2010 to free up pension designs, so employers can better control defined benefit costs whilst continuing to provide a more stable pension outcome than is possible with defined contribution.”