Aon says DB closures continue
UK – The closure of defined benefit pension schemes in the UK shows no signs of slowing down over the next three years, according to research from Aon Consulting.
According to a survey of 115 company schemes, the number of open schemes could drop to just 18% by 2009.
The report, which is charting the move away from DB schemes over a six-year period, also stated that the number of open DB schemes today has dropped to 30% from 60% in 2003.
According to Aon, companies that still operate open DB schemes are under increasing pressure to change amid spiralling costs, which will ultimately outweigh their preference for DB.
Roughly two-thirds of companies stated that they kept their scheme open because it "the right type of pension for my company". A large percentage of respondents (43%) also claimed that they had left the scheme open because their DB plan was a valuable recruitment tool.
Some 61% of DB schemes in the UK are closed to new members but open to accrual, with one-fifth of these considering closing to accrual within the next year and close to half (40%) in the next three years.
According to the survey, the closure of DB schemes to new hires is going on at a faster rate than changes to accrual, which reflects the more difficult nature of the change.
Common reasons cited for remaining open to accrual to date includes a belief that the process of closure to accrual would be too painful (32%), board resistance (36%), and union and employee pressure (38%), said Aon.