DB schemes continue to lose favour

More than half (58%) of employees have had to increase their contribution levels into defined benefit (DB) pension schemes in the past 12 months.

Other employers (17%) have moved from offering a DB scheme to a defined contribution (DC) plan in a bid to control costs, while a further 12% have increased company contributions to a DC scheme, according to The changing nature of corporate pensions in the UK, by consultancy Towers Perrin.

A fifth of respondents intend to increase their contributions to DC schemes in the next two years, while just under a third (31%) plan to raise employee pension contributions in the same time frame. The same number (31%) propose to replace staff contributions with a salary sacrifice arrangement.

A further 21%, meanwhile, plan to integrate their organisation’s pension schemes into a flexible benefits plan.

The demise of DB schemes looks set to continue, with 14% of respondents planning to close their scheme to new entrants.

What changes do employers propose to make to pension plans over the next two years?
Lower value of defined benefit (DB) plan 40%
Replace employee contributions with salary sacrifice 31%
Increase employee contributions 31%
Integrate with wider flex programme 21%
Cash alternative to pensions 20%
Increase employer DC contributions 20%
Close DB to new entrants 14%