More than half of the defined benefit pensions schemes in the private sector are set to close to new joiners in the near future, according to research released by the National Association of Pension Funds (NAPF).
The result of the Pension Provision and the Economic Crisis survey, conducted with 100 pension schemes between 7 and 13 January, is equivalent to 1,000 pensions schemes likely to close in the next five years.
The survey also shows that out of the schemes that will remain open to new members, 24% intend to transfer existing members into a defined contribution (DC) or hybrid/career average scheme. Out of those due to close to new members, 27% plan to transfer current members into such arrangements.
As a result of this survey, the NAPF is calling for action to enhance scheme member security by making the government the ultimate guarantor of the Pension Protection Fund and to make schemes more cost efficient. It also wants the government to ease pressure on scheme sponsors and help schemes manage their liabilities and deficits.
Joanne Segars, NAPF chief executive, said: “These exceptional times call for exceptional measures and new thinking. We have seen bold action from the government in response to the crisis in other key areas and similar action is now needed for the UK’s pension schemes.”
Keith Barton, Association of Consulting Actuaries chairman, said it supported the NAPF action plan and added the government should take a strong lead on the issue. “A firm lead needs to go out from both to sponsors and trustees that makes it clear that the best interests of pension scheme members will in most cases be delivered by trustees and sponsors working together to ensure sponsors are able to continue to support ongoing defined benefit schemes,” he said.
Kevin Wesbroom, UK lead Global Risk Services at Hewitt said: “The NAPF survey shows that a quarter of schemes face closure over the next five years and we all know that in this economic climate companies are under pressure to reduce expenditure. Faced with the potential alternatives of reducing head count or pay cuts, a reduction in pension benefits may be one of the least unpalatable options.”
Mark Duke, head of pensions at Towers Perrin said employers may consider moving all employees onto the same pension to avoid having two classes of pension provision within the same company.