UK - Scrapping occupational pensions and giving staff a cash alternative instead is being considered by a growing number of companies, Towers Perrin claims.
The consultant’s survey of more than half the FTSE350 shows that around a quarter of firms say they are considering, or would consider, the cash option.
The survey confirmed that defined contribution schemes had largely replaced final salary provision for new employees – 65% in 2004, compared to 28% in 2002. It also found a 46% increase in the number of defined benefit schemes being closed to existing employees.
Towers Perrin partner Peter Routledge said: “This research proves the next phase of the UK’s migration to DC pensions has begun. Companies have now largely closed DB plans to new entrants but the only way to really tackle pension liabilities is to start to change existing employees’ benefits.
“If stage one was to close pensions to new hires and stage two is to close existing DB to existing employees, we are already seeing evidence that the final stage might simply be to replace corporate pension plans with a cash allowance and let individuals take full responsibility for planning for an income in retirement.”
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