Ninety-five per cent of employers still make contributions to company
pension schemes for existing employees.
The Chartered Institute of Personnel and Development (CIPD) annual reward
survey polled 500 HR professionals, and not only found large-scale use of
organisational pension schemes, but also that many companies plan to increase
their contributions rather than close pension schemes this year.
The results, released at the CIPD’s annual reward conference in London last
week, reveal that 87 per cent of employers make contributions to new employees’
However, employers are changing the types of schemes on offer, with a marked
difference in the way that existing and new employees are treated. Nearly half
the UK’s employers provide existing staff with a defined benefit (final salary)
These schemes are often seen as the best form of pension provision, as they
are normally based on the salary at or near retirement and on length of
Under defined contribution schemes, each person has an individual account
which is invested, and its value on retirement is used to provide the pension
However, for new employees, two-fifths of organisations now offer a defined
contribution plan (also known as a money purchase scheme), with just a third
providing a defined benefit scheme.
Charles Cotton, CIPD adviser, reward and employment, said most organisations
see the benefits that offering a pension scheme has on recruitment and
He said there is, however, a move from defined benefit to defined
contribution: "The shift has been around for a while, but has become more
noticeable because more companies are going down that path."
Of those planning to make changes to their existing pension arrangements,
about 35 per cent plan to close final salary schemes to new employers in 2003.
By Quentin Reade
Pension arrangements for new employees
EMPLOYEES Senior middle/first non-manual manual
management management non-management management
Defined contribution/ 39 42 42 43
money purchase plan
Defined benefit/ 35 32 32 33
final salary plan
Personal pension 22 21 19 18
Stakeholder pension 15 16 18 16
Hybrid (mixture of DC and DB) 2 2 2 2