Half of defined benefit (DB) pensions in the private sector are expected to close to new joiners in the near future, research claims.
The ‘Pension Provision and the Economic Crisis’ survey by the National Association of Pension Funds (NAPF) found 52% of DB pension schemes could close due to the recession.
Nearly a quarter of the DB schemes remaining open to new members will transfer existing members into defined contribution (DC) or career average schemes. Close to a third of DB schemes being closed will do the same.
Kevin Wesbroom, UK lead global risk services at professional services firm Hewitt, warned shutting DB schemes was not the only option available for employers looking to save costs.
“Although scheme closure is undoubtedly one of the options under deliberation, there is also a range of alternative strategies which may help reduce pension pressure and which are being actively considered,” Wesbroom said.
These include capping pensionable pay, changing accrual rates or contribution amounts, he said.
“Support from the government to help these alternative approaches may help us to avoid a rapid decline in the coverage of high quality pensions – and also the inevitable social consequences which would follow,” Wesbroom added.
Meanwhile, the government’s personal accounts pension scheme will now be introduced over two years to avoid IT problems.
Tim Jones, chief executive of the Personal Accounts Delivery Authority, revealed that the roll out will now begin in 2011 and take until 2014 to ensure it works properly.
Volunteer employers were able to bid earlier this month to be among the first to administer the scheme. Larger employers will enrol early on in the process, with more batches joining every 12 to 18 months.