DB scheme closure increasing - NAPF annual survey
UK- The number of companies closing their defined benefit pension schemes to new members is still increasing, reveals the NAPF’s annual survey.
According to the National Association of Pension Funds’ survey, 26% of final salary schemes closed to new staff in 2003, compared to 19% in 2002.
Three quarter of the companies questioned said that the move to money purchase pension schemes was to “contain costs.”
More positively, the survey revealed that for every one scheme that shuts, two more increased their contribution rates to retain a final salary scheme for employees, with 53% of employers raising their contribution level, compared to only 7% in 2002.
Also, 60% of those companies with final salary schemes questioned said they did not expect to experience any funding difficulties next year. Of those who do expect to face funding difficulties, 70% have raised or are thinking of raising their employer contributions. “
"These findings again highlight the positive action employers are taking, despite the various other pressures they are under, to help safeguard the future retirement incomes of their employees,” said the association.
Schemes were also asked about the extent to which they were complying with each of the Myners principles. Apart from one of the principles, the percentage of compliance for each principle was over 66%; the only principle where compliance rate fell below this percentage was on shareholder activism. Although, explains the NAPF, shareholder activism did not apply to a high percentage of those questioned, as they might have been operating a pooled pension fund.
With regards to the proposed Pension Protection Fund, responses were mixed. Half of those surveyed said the initiative would make it less attractive for employers to provide defined benefit schemes.
The 29th NAPF annual survey is based on responses from 464 NAPF member companies.