UK – The number of defined benefit schemes may be decreasing, but employers still remain the main contributors to occupational pension plans, according to the employers’ body the Confederation of British Industry. 

In its annual Employment Trends Survey with recruitment agency Pertemps the CBI surveyed 500 British companies and revealed that only 27% now offer a defined benefit scheme to employees, compared to 43% last year.

Falling stock markets, the government’s withdrawal of dividend tax credits and the minimum funding requirement have led to escalating costs, while the accounting standard FRS17 has led to increased volatility in company accounts, the CBI said.

All this has resulted in an increasing number of companies choosing to close their final salary schemes, the organisation said. John Cridland, the CBI’s deputy director general, said: “The dam has burst as rising costs overwhelm employers.”

The most popular form of pension provision is now stakeholder, with 57% of companies offering the arrangement to employees. Defined contribution schemes and group personal pension plans followed in popularity.

Employers are still contributing more into occupational pension schemes than employees, however, says the survey. In defined benefit schemes, employers tend, on average, to contribute 13% of the salary compared to five percent by the employee.

In money purchase schemes, employer contributions are six percent of salary, compared to five percent from employee contributions. The average employer contributes four percent of an employee’s salary towards a stakeholder pension plan compared to just three percent by the employee.

The CBI is calling for “radical proposals that will make pensions simpler and more affordable”.

David Willetts, the opposition Conservative party’s pension spokesman, also criticised the government. He said: “Almost from the moment Labour came to office, they have added to the cost of companies running pension schemes. It is hardly surprising that faced with rising costs companies feel they have little incentive to keep pension schemes open.

“Labour have claimed that occupational pension schemes were one of the great welfare successes of the last century. In six years they have now brought them close to extinction in the private sector.”