UK - The "remarkable pace of change" witnessed as corporate pensions schemes switch from DB to DC is set to continue, found the Towers Perrin "UK Corporate Pensions Survey 2006".
Just one fifth of the 170 companies surveyed now offer a DB scheme to new employees, compared to more than two thirds of respondents in 2002. Within that fifth, one third of the companies plan to stop offering DB within the next two years.
According to the survey results, employers pay an average of just 6.9% of employee salary into DC schemes, which compares to an average cost of between 15% and 20% for DB schemes: saving employers approximately two thirds of their pension cost.
"The future of corporate pensions in the UK is undoubtedly DC," stated Mark Duke, principal at Towers Perrin. “The cost savings are clear. The challenge going forward is to make DC work well for employees. “
The survey also showed half of large UK companies expect to make significant changes to pension arrangements provided to existing employees in the next three years. Pensions legislation and reform, financial pressures and accounting standards are the top three most important issues driving company retirement plan changes.
“Over the next few years we will see companies lowering the value of DB commitments, increasing employee contributions, replacing employee contributions with salary sacrifice and changes to retirement ages. DC is here and it is here to stay. Companies now need to focus on raising its profile with employees, making it work harder and more effectively,” continued Duke.
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