UK – Consulting firm Towers Perrin says there has been a “massive migration” to defined contribution schemes in the UK.
The firm surveyed 186 companies in the FTSE 350 index and found “there has been a massive migration from defined benefit pension funds to defined contribution schemes”.
And more change was to come. It said 45% of companies say they will make significant change to their pension arrangements in the next three years, with 51% of those companies planning to integrate pensions into a wider flexible benefits programme.
“A number are also considering a switch from DB to DC for existing employees as well as just new hires,” the firm said.
The firm found that 24% of all companies say they are considering, or would consider, introducing a cash alternative to pension arrangements as an option for employees. And 14% were considering, or would consider, a cash alternative to a pension scheme as a company-wide policy.
"The high level of interest in offering cash instead of a pension plan is a direct consequence of the current move to individual employee responsibility," says Peter Routledge, partner at Towers Perrin.
"We might even look back at the present move to DC as a stepping stone from the DB promise of pension in retirement to simply giving employees more cash now. This reinforces the need for employees to receive better financial education to avert poverty in old age."