More than one in 10 UK defined benefit (DB) pension schemes say they are likely to close their final salary plans to new members within one year and introduce new pension arrangements, according to the 2001 Survey of Occupational Pensions Schemes by market research groups The Pension Fund Partnership and MRM Projects.
The numbers underpin a general sense of concern within UK pension funds over the complexity of pensions legislation. Half of all pension plans reveal that keeping abreast of legislation as well as the uncertainty of government decisions are major challenges to their operations.
Kevin Sims, partner at the Pension Fund Partnership, comments: “The findings show that these concerns have not diminished at all in the three years this major annual survey has been carried out.”
The survey reveals that the percentage of hybrid pension schemes introduced into the UK market is increasing rapidly, with numbers up by some 50% on the 1999 and 2000 figures.
Seventy per cent of respondents to the survey said that if forced to close their DB arrangements they would opt for a defined contribution (DC) plan, while 10% would opt for new stakeholder pension plans. Again, around half of DB funds say that funding issues and the expense of running an occupational pension scheme are problematic.
Fifty per cent of schemes say they pay company contributions in excess of 10% into their DB plans. Pension funds may also be feeling the effects of the market downturn on solvency levels with a quarter of schemes above £500m reporting MFR solvency levels below 100% – up from a fifth last year.
Indications are strong, however, that the pension industry is becoming more professional. Overall, around three quarters of trustees have now attended a trustee training course, and the survey notes that investment matters dominate trustee meetings today.
The percentage of plans using their own custodian has also jumped dramatically in recent years, up over 50% from 1999 levels.