GLOBAL - Employers redesigning their pension schemes are reducing their contribution rates drastically, while a third will make changes to their defined benefit schemes in the near future, according to a survey by Mercer.
Mercer's Scheme Design Survey - which analysed responses from 220 multinational companies in the US, UK, Germany, France, Italy and the Benelux countries - shows only 14% of respondents' schemes were open to future accrual and 38% were closed to future accrual, while nearly a half were closed to new entrants.
Chris Sheppard, head of Mercer's scheme design group, said: "Although defined benefit schemes are nearly extinct, company schemes were evolving.
"But with employer contributions falling, while employer contribution rates stayed broadly the same, there was a detrimental impact on employees' retirements."
The survey found that, where schemes were still open for accrual, the average employer contribution was 17% and the average employee contribution 6.3%.
But where changes had been made to a scheme, the employer contribution had fallen to 11.3%, while worker contributions increased slightly to 6.4%.
Where changes were planned, employer contributions were set to drop to 10%, with employee contributions due to fall to 5.5% (excluding AVCs).
Nearly half of respondents said they had made changes in the last two years, with the majority (52%) closing to future accrual.
A quarter of respondents had increased member contributions, while 11% had closed to new entrants.
Respondents had used a variety of other methods to reduce costs, including reducing increases to pensions in payment (9%), switching to career average (8%) and reducing accrual rates (8%).
Other cost-cutting measures included raising the normal retirement age, capping increases to pensionable salaries and changing early retirement terms.
Of the one-third of respondents considering making changes to their defined benefit scheme in the near future, 15% said the decision had been finalized and 50% said the decision had been provisionally made, while 35% had yet to make a decision.
The most popular areas for cost cutting were closing to future accrual (75%) and reducing the accrual rate (12%).