Rush to close final salary pensions schemes draws to a close

The
number of companies closing their final salary (defined benefit) pension
schemes to new members has fallen dramatically in the past two years and is
likely to continue to decline, according to a new survey by Mercer Human
Resource Consulting.

The
survey, involving more than 1,800 UK pension schemes, showed that more
companies have either made policy changes in the past year, or intend to do so
next year, to retain their final salary schemes.

The
percentage of companies with final salary schemes open to new members has
fallen from 56 per cent in 2002 to 38 per cent this year.

Of
those companies with open schemes, 39 per cent increased employer contributions
last year, or plan to next year, while 29 per cent have decided to increase
employee contributions. Fifteen per cent have reduced benefits for future
service or intend to do so.

Only
12 per cent of organisations plan to close their final salary scheme to new
entrants.

Peter
Bowers, worldwide partner at Mercer, said: "In the past two years there
has been a dramatic fall in the number of final salary schemes open to new
members. Now companies are seeking ways to retain their final salary schemes on
a more cost-effective basis.

"Final
salary schemes are highly valued by employees and can help to differentiate
companies when recruiting staff. In future, members’ benefits are likely to be
lower and their contributions may be higher, to make schemes more
affordable."

The
survey found that 92 per cent of final salary schemes in the Government sector
are still open to new members. In the energy sector, 65 per cent of schemes
remain open, while in the chemical industry the figure is 53 per cent.

In
contrast, just a quarter of final salary schemes in the insurance industry and
a fifth in computer software design and development companies are open to new
members.

By Mike Berry

 

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