UK - Government pension "policy drift" is threatening future pension incomes as employers are failing to increase contributions in money purchase plans, according to the Association of Consulting Actuaries.
A survey by the ACA of 330 employers with defined benefit (DB) and defined contribution (DC) pensions scheme revealed four out of five (81%) defined benefit schemes are now closed to new members - up from 68% two years ago.
Change is therefore needed to allow greater risk-sharing of pension contributions between employers and employees, suggests the ACA because evidence suggests employers have not increased their DC contributions and members are therefore likely to see lower than anticipated income at retirement unless reform encourages higher payments.
Contributions into DB schemes by employers has hit record levels to an average of 22.6% of each employee's earnings, compared with 11.5% five years ago, said the ACA, yet contributions to money purchase (DC) are a third of that figure and this has not changed in two years despite suggestions from employers they would increase payments.
ACA notes over a six-year period there has been an overall improvement in contributions into occupational money purchase schemes to around 10% of earning. However, whereas there was evidence two years ago to suggest as larger firms switched to defined contribution would also increase average DC contributions, this does not appear to have happened.
A government-commissioned Deregulatory Review of Private Pensions is due to be published soon but the ACA points out it has already been delayed.
Chairman Ian Farr said its evidence supports the ACA campaign for development of legislation supporting the sharing of risk between employees and employers otherwise the government faces increased numbers of people facing "under pensioning".
"We do not expect employers to reverse their closures of defined benefit final salary schemes - the desire to de-risk remains despite changed interest rate and investment market conditions," said Farr.
"So unless pension contributions into defined contributions climb or more employees are covered by risk-sharing schemes, there is a very real danger man y more pensioners will need to relay on means-testes State benefits in the future than currently predicted," he added.