ACA decries growing gap between public and private sector provision

Private sector pensions have suffered from a “seismic collapse” with provision falling far short of the public sector, according to the Association of Consulting Actuaries.

The ACA surveyed 468 employers running more than 560 schemes - with combined assets topping £114bn - and found 90% of private sector defined benefit schemes are now closed to new entrants and 40% are closed to future accrual.

The organisation said the government must do more to reinvigorate private sector pensions, arguing the divide between public and private pensions will only increase in the current tough economic climate.

ACA chairman Stuart Southall (pictured) said: "The government needs to be bold in helping private sector employers so they can consider new ways to boost pension savings over the mid to longer-term so public sector pensions are not ‘far better'.

"A more level playing field as between private and public sector pension provision is clearly a sensible aim but it is possible that the current government attempts to achieve this have already been undermined by the seismic collapse of private sector pensions and, in both sectors, it seems probable that the later the cure the stronger will have to be the medicine."

As a sign of the divide, more than 80% of employers support the Hutton report recommendations to scale back public sector pensions - while 79% said contributions should increase and 91% believe the pension age should rise to the state pension age in public sector schemes.

A quarter of employers are now looking for a buyout or buy-in for the DB liabilities in the next five years, while 40% would like to do so within a decade.

Worryingly for the government, only about a quarter of employers have budgeted for the additional costs of auto-enrolment.

Three-quarters of employers are set to auto-enrol employees into an existing scheme, but 27% are likely to review their existing benefits to offset the surge in membership.

A shred of hope comes from at least half of all employers saying they should share or take on a majority of pension risks in investment, longevity and inflation risk rather than placing it all with the employee.

Southall added: "Inevitably any fresh initiative to boost pension savings will require both an easing in regulatory controls and, in all probability, new incentives to encourage employers and employees to take up the challenge and opportunities."