The much vaunted shift by UK pension funds to defined contribution (DC) schemes is being exaggerated, with only a marginal drop of less than 10 % recorded in the number of companies switching from defined benefit (DB) plans since 1990.

According to research carried out by consultants Watson Wyatt, the fall in DB plans being offered, from 89% to 81%, confirms a more gradual nature to the trend for DC, bucking the opinion of many industry commentators.

Furthermore, 70% of companies reviewing their pension arrangements actually decided to retain their existing DB plans.

Nevertheless DC popularity is growing in the UK, the report says, with the number of organisations using group personal pension plans having risen from 1% in 1990 to 4% today.

However, these companies tend to be small and the report predicts that DC schemes will still only account for around 8% of total occupational assets by the end of 2002.

And a report by consultants Towers Perrin has found that 80% of companies with DC schemes contribute less than 10% of their payroll to employees' pensions, with 40% contributing less than 5%.

But, the report says, cost control not reduction is one of the primary objectives for companies in setting up DC schemes, and problems have arisen because the DC switch has been more complex than employers expected.

John Conroy, head of investment consulting at Towers Perrin said: This is not a reflection of employers' generosity, but an attempt to keep the design of DC schemes simple.""