UK - The number of final salary schemes open to new members has dropped by almost 40% in the past year, a survey by the Confederation of British Industry reveals.
And take-up of stakeholder plans by firms has outstripped that of occupational defined contribution or group personal pension schemes.
The CBI’s latest Employment Trends survey found that only 27% of firms now offer a defined benefit scheme to new staff compared with 43% a year ago.
And of the 550 companies surveyed 14% had set up a new stakeholder fund for their staff over the past year, while only 1% had introduced a new DB scheme.
The CBI blames the trend away from DB on escalating pensions costs. Senior policy advisor Jay Scheth explained: “I think the costs of the switch away from DB is largely due to increased costs from things like government control, increased life expectancy and stock market conditions.”
He added: “In the past few years employers have had to increase their contributions and in many cases this is not going to be sustainable.”
Momentum Financial Services national accounts director John Robbie agreed.
He said more companies were opting for stakeholder schemes rather than final salary or occupational money purchase arrangements.
“Stakeholder schemes are becoming ever more popular and are making a move over DB, which is hardly surprising.
“The reason for choosing stakeholder rather than an occupational DC plan is that it is simpler for employers to understand and there are cost savings.
“Also, with a stakeholder scheme there is no ongoing involvement – more senior managers are less comfortable acting as trustees because they don’t have the specialist knowledge or experience.”
Despite the increased pressure on funds, the research found employee contributions had remained constant during the past five years and “surprisingly few” companies had asked employees to top up their personal contributions.
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