Final salary pensions on last legs as employers plan 2012 switch

Thousands of employers with defined contribution pension schemes will close them to new members when the personal accounts system launches in 2012, according to a study.

The 34th National Association of Pension Funds Annual Survey, which polled more than 300 pension scheme managers, found that average employer contributions to defined contribution schemes stood at 7%.

From 2012, employers will have to put 3% of an employee's salary into the government's personal account scheme or its own pension scheme, unless the employee opts out.

Among employers with a defined contribution scheme, 17% said they expected to switch to the personal accounts system from 2012. A further 4% said they would stick with their current scheme, but cut their contributions to new members.

David Yeandle, head of employment policy at manufacturers' body the EEF, told Personnel Today the economic climate could be to blame for the trend to reduce payments.

"If the personal accounts system was brought in today, there would be a lot of pressure on employers to level down," he said. "Hopefully, we will not be in such a scenario in 2012."

The survey also found that just 28% of defined benefit schemes remained open to new members - down from 31% last year and 70% in 2002. And 20% of the employers still offering final salary pensions were considering changing to defined contribution schemes.

Employers are being forced to switch to defined contribution schemes due to increased life expectancy, rising pension management costs and the economic downturn.