UK - Scheme wind-ups are soaring with over 10,000 currently being axed, figures from the Occupational Pensions Regulatory Authority show.
The figures have more than doubled in the past five years. OPRA said that at the end of March 1999 a total of 4366 were in the process of winding up. But by the end of June this year the figure had soared to 10,516.
Barnett Waddingham partner John Bridger described OPRA’s figures as “worrying” and predicted the majority of schemes in wind-up were either defined contribution or insured, covering employees at small-to-medium-sized firms.
National Association of Pension Funds chairman Terry Faulkner - who is group pensions and benefits manager at Rexam - attributed the increase to the economic downturn at the start of the decade.
He added that rather than just closing defined benefit schemes, companies were looking to axe their other arrangements. And, as an example, he pointed out that Rexam had just wound up one of its DC schemes.
Faulkner said: “Aside from DB, companies may be closing all sorts of other schemes and moving into stakeholder for instance.
“Because pensions are high-profile, companies may well be saying - and we just did this - instead of running closed DC schemes, why not wind them up? That may be one of the reasons for the big increase.”
Consultant FPS says its wind-up section has seen a “marked” increase - despite government regulations which require firms to meet full buy-out costs.
FPS business development manager Jim Hazzard said the combination of increased DB costs, the accounting standard FRS17 and the increasing demands on trustees had prompted the surge in the number of wind-ups.
He said: “There appear to be a number of factors at work, but concerns about the extra responsibilities and costs implied in the draft provisions of the Pensions Bill are clearly motivating decisions. I suspect our experience is not unique.”
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