Private sector final salary pension closures continue to rise

The recession has continued to take its toll on private sector final salary pension schemes, with a number closing in the past 12 months, annual research reveals today.

The survey of 300 National Association of Pension Funds (NAPF) members – published a day after it was revealed that Vodafone planned to close its final salary scheme to about 4,000 existing staff – shows that 23% of schemes remain open to new members, compared to 28% a year ago.

Further changes are also likely as more schemes than before have indicated that they will change benefits in the near future to new employees and/or current scheme members.

However, contributions to defined contribution (DC) schemes have not been cut back as a result of the recession, the survey shows. Average contribution rates to DC schemes have remained stable and now stand at 11.5%. Additionally, 10% of schemes have suggested that they will increase contributions in future.

Uncertainty remains over the impact of the government’s 2012 pension reforms: 41% said they will maintain their scheme in its current form and auto-enrol their employees into it.

However, the risk of ‘levelling down’ remains: 8% of schemes say they are planning to reduce their contributions in 2012.

A further 10% said employees who do not choose to join the existing pension will be auto-enrolled into Personal Accounts at the minimum level and a further 13% are proposing other changes, while 27% of schemes have yet to decide what action they will take.

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