UK - Nearly 40% of firms which ran open final salary schemes have closed them to new entrants in the past two years, a Watson Wyatt survey shows.
But the consultant says that while switching from final salary to defined contribution for new entrants remains the most popular choice, the most interesting trend has been the increase in risk-sharing pension scheme designs.
Watson Wyatt’s biennial survey of over 200 UK pension schemes found that of those firms which had final salary pension schemes open to new entrants two years ago:
- 30% had closed them to new entrants and introduced DC arrangements;- 8% had closed them to new entrants and introduced career average or cash balance arrangements; - 16% had kept them open to new entrants but reduced benefits or increased member contributions; - 46% had made no changes.
Watson Wyatt partner Colin Singer said that while cash balance or career average schemes typically paid out lower benefits to members than final salary schemes, they were more popular with employees than DC arrangements. Risk sharing schemes have an 80% take-up rate, compared to DC’s 65% rate.
“The pace of change to employer-sponsored pensions has been incredibly fast. But while the well documented trend away from final salary and towards DC continues, the more significant finding is the number of employers who are moving to risk-sharing designs.”
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