Half of final salary/defined benefit pension schemes could be closed by 2011

Half of employers with final salary or defined benefit schemes could be closed to future accruals by 2011, trebling the number that have already done so, a survey has suggested.

A survey of 150 employers by risk management and HR consulting firm Aon found 14% of defined benefit schemes are closed to future accruals.

However, those closing to accrual last year included a number of household names including Debenhams and the Royal Bank of Scotland, and this is expected to make this ‘nuclear option’ far more acceptable for others to follow.

Paul McGlone, principal and senior actuary at Aon Consulting, said: “We expect that the trend to close to accrual will follow the earlier trend to close to new entrants, but the question is how quickly.

“The average period between closing to new entrants and closing to accrual is currently around seven years. However we believe that this could accelerate, and that 2007 will be a tipping point.”

For those employers resisting closure, there are increasingly interesting options available for their defined benefit schemes, such as hybrids and contracting back into the State Second Pension scheme, the survey found.

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