Employers still putting in to company pension plans

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’
pension schemes.

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)
pension scheme.

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
service.

Under defined contribution schemes, each person has an individual account
which is invested, and its value on retirement is used to provide the pension
benefit.

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
retention.

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.

www.cipd.co.uk

By Quentin Reade

Pension arrangements for new employees

% OF
EMPLOYEES                           Senior                          middle/first                  non-manual                 manual
non-   
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

Source: CIPD