Despite industry predictions of the imminent closing of all private sector defined benefit (DB) pensions schemes, a new study of FTSE100 companies show that around a quarter of the UK’s largest companies still provide DB pensions to at least some of their staff.
The analysis, carried out by pensions advisory firm Isio, also reveal that less than half of the 24 schemes with active members have a significant level of continuing pension build up; the rest being available to only a relative handful of employees.
Only 10% of the FTSE100 are still providing DB in any meaningful way and just one company, Croda International, remains open for new joiners.
Half of FTSE100 DB schemes have closed fully over the past decade, with 10 closures over the last two years alone.
The main reasons for this have typically been to reduce costs, with most DB pension schemes costing well in excess of 20% of salaries, to reduce risk and to increase fairness, addressing the disparity in spend on employees in DB and defined contribution (DC) arrangements.
For the companies that closed their schemes to new joiners, most of which did this more than 10 years ago, these schemes will naturally shrink and ultimately ‘self-close’ to all pension build-up, the study concluded.
Scott Kendrick, benefit change lead at Isio, said: “In the current high-inflation environment, we are seeing some companies facing increasingly significant pay claims. Against this backdrop, some will seek to make savings on their pensions spend, and at the same time address the pensions gap between DB and DC populations.”
However, he added, there are also companies putting pension change on the backburner to avoid potentially disrupting a post-pandemic recovery and tight labour market.
Investor group calls on UK CEOs for action on mental health
A group of 29 asset owners, institutional investors and stewardship service providers representing $7trn in assets, has written to the chief executive officers of 100 of the UK’s largest listed companies, urging them to take immediate and concerted steps to develop and implement effective management systems and processes to address workplace mental health.
The group has been convened by responsible investment manager CCLA and comprises the founding signatories to the CCLA-led Global Investor Statement on Workplace Mental Health, which was launched in May this year.
Its signatories include Brunel Pensions Partnership, Nomura Asset Management and Federated Hermes.
The letters are directed at the companies in the CCLA Corporate Mental Health Benchmark – UK 100, which also launched in May to provide a reliable tool for investors to understand and compare corporate practice on mental health.
The signatories call on company CEOs to ensure that they optimise their organisation’s performance by eliminating avoidable costs associated with mental ill-health and taking concerted efforts to create the working conditions under which every individual can thrive.
CCLA started to examine the subject of emotional wellbeing and mental illness at its investee companies in 2019.
The most recent research on mental health and employers by Deloitte highlights the scale of poor mental health within the UK workforce. It estimates that the total annual cost of poor mental health to the private sector in the UK was £43-46bn in 2020–21, an increase of 25% since pre-pandemic estimates in 2019.
However, the report also found the returns on investment of workplace mental health interventions to be much more positive – estimated at £5.30 for every pound invested in 2020-21.
Workplace pension members plan to cut back on contributions to cope with rising living costs
Faced with soaring costs of fuel, food, and other essentials, new research from consultancy firm Barnett Waddingham suggests 7% of people with a workplace pension are planning to reduce their contributions to cope with the rising cost of living.
This translates to 1.05 million people, Barnett Waddingham disclosed.
Worryingly, younger people appear particularly likely to consider reducing pensions spend to make ends meet. Almost one in five 18 to 24-year-olds (18%) said they planned to reduce their contributions, at a time when it’s vital to lay the foundations for a stable financial future, the firm stated.
As the cost-of-living crisis continues, Barnett Waddingham’s research suggests it could push people to use funds earmarked for retirement planning to supplement increased costs too.
The research showed that 3% of those aged 55-plus with a pension plan to draw down their pension to keep up with the rising cost of living.
Since most people are already not saving enough into their pensions, these developments could have a profound impact on financial resilience. “It makes it even more important that employers explain the level of contribution needed to fund a comfortable retirement,” the consultancy stated.