UK - National Association of Pension Funds' fears that impending legislation will kill defined benefit provision have been reinforced by a Watson Wyatt survey.
Its study shows that while a “hard core of employers” want to keep their final salary schemes open to new members, provisions in the Pensions Bill do represent a threat.
The NAPF has sent a letter to all political parties and Pension Commission chairman Adair Turner warning that proposed changes will “disincentivise” DB schemes.
Watson Wyatt’s research found that 65% of the 200 firms surveyed said that final salary pensions fitted well with their organisational culture and employee reward strategy, while 45% claimed it gave them a competitive advantage.
Watson Wyatt partner Colin Singer said: “While many employers have moved away from final salary to defined contribution or alternative, risk-sharing pension designs, there looks set to remain a hard core of employers who believe that, in the long-term, a final salary scheme is the most suitable type of pension structure to meet their business strategy.”
The survey found that 75% of employees said they valued the quality of DB benefits.
The highest take-up proportion – among eligible employees – was for final salary schemes (89%) compared with 65% for defined contribution schemes.
However, Watson Wyatt admitted that the Pensions Bill – published towards the end of the period in which the survey was carried out – did represent a threat.
Senior consultant Stephen Yeo said: “In particular, if the new statutory funding objective does not enable a balance to be struck between the reasonable desire for security and the amount of benefit to be delivered, then the minority of final salary schemes that remain open will come under pressure, despite their popularity.”
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