UK DB scheme closures double in one year
UK – The number of companies that have closed their defined benefit (DB) schemes to new members has more than doubled over the last year, according to the National Association of Pension Funds’ (NAPF) annual survey of UK pension funds.
Though the survey finds that employers try wherever possible to expand and improve the benefits they provide through their pension schemes, the number that have closed their DB plans to new members has risen sharply compared with last year.
The NAPF says this reflects the concerns of employers about the cost of providing DB schemes, the amount of bureaucracy involved and the impact of new accounting standards, particularly FRS17. Over 77% of those surveyed said FRS17 will make offering a DB scheme less attractive than at present.
David Cranston, director general of the NAPF, comments: “Today’s survey provides graphic evidence of the pressures faced by employers offering DB schemes. Falling interest returns, combined with long life expectancy undoubtedly account for much of this pressure. But the volume and complexity of red tape has clearly weighed heavily enough with some schemes to drive them away from DB provision.”
Other significant findings of the report include the fact that 95% of pension funds feel that providing an occupational pension scheme now takes up more company resources compared with five years ago, and 92% expect this trend to continue over the next five years.
As for the recent introduction of the stakeholder pension system, the survey suggests that fewer than one in ten companies intend to replace their existing occupational scheme with a stakeholder plan, whilst seven out of ten private sector schemes do not see the introduction of stakeholder having any effect on the benefits they offer.