UK - Only 1% of private sector defined benefit schemes expect to close to current employees before 2013, the National Association of Pension Funds has revealed.

Findings from the latest NAPF Annual Survey of UK pension schemes showed the proportion of DB schemes remaining open to new members has become "relatively stable" at 31% of DB schemes, while 95% still allow members to accrue new benefits.

The NAPF said the survey of 369 member schemes suggested the rate of DB closures has "slackened considerably", as over the next five years 40% of private sector DB schemes expect to maintain their existing pension arrangements, 22% predict they may have to modify schemes but plan to retain some DB elements, while 15% expect new employees to be entered into a defined contribution scheme.

In addition, the NAPF said DB schemes were, on average, 93% funded in 2007 on an IAS19/FRS17 basis - an increase of 4% from 2006 - while the number of schemes reporting an accounting surplus increased 9% to 27%.

That said, the NAPF warned the impact of pension reform, including the introduction of personal accounts, should not be underestimated, as 75% of schemes believe they will have to make some changes to their schemes, such as auto-enrolment, to comply with the new rules.

These results also underlined the potential threat of levelling down, as the survey revealed employers operating DC schemes are on average contributing 7% of pensionable pay - which is more than double the 3% required by personal accounts.

The NAPF also stressed the importance of a good quality default fund as the research showed 91% of members with access to a default fund in a DC scheme are not making a conscious investment choice and instead are leaving their money in the default fund.

Other findings indicated a continuing trend away from equities towards fixed interest and alternative assets as the proportion of DB assets invested in equities fell 5% to 55%, while allocation to fixed interest increased 3% to 29%.

Alternative investment is also proving more popular among schemes as the proportion investing in property increased to 60%, while hedge fund investment has more than doubled from 8% to 17%.

Joanne Segars, chief executive of the NAPF, said: "While the overall picture shows the pensions landscape is stable, the operating environment for occupational pensions is tough and likely to get tougher."

She claimed the government should use the current Pensions Bill - which has its second reading on 7 January - to bolster current workplace pensions, and warned the recent deregulation proposals are simply a first step.

"More must be done to offer support to employers offering good workplace pensions to ensure they remain open and can afford to invest more than the minimum required under the personal accounts system," Segars added.

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