UK - A hard core of employers have decided to keep their final salary schemes open to new employees because they believe it fits their organisational culture and gives them a competitive advantage, according to a survey by Watson Wyatt.
The firm found that some employers had kept a final salary structure but shared more of the costs with employees by increasing employee contributions, reducing the accrual rate for benefits, raising the normal retirement age or making early retirement terms less generous.
According to Watson Wyatt, often such changes are introduced together as a package and, increasingly, employees are offered a choice of contribution and accrual rates. Some 27% of final salary plans in the Watson Wyatt survey now offer employees such a choice.
Colin Singer, a partner at Watson Wyatt 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 Watson Wyatt survey found that while 30% of employers had closed their DB schemes to new entrants and introduced DC arrangements, 16% had kept them open to new entrants but reduced benefits or increased member contributions and 46% had made no changes and the final salary scheme remained open to new entrants.
Dinger added: Some employees value pension benefits more than others and are willing to make higher contributions themselves. Employers are increasingly taking the view that there is more value to their business in providing higher pension benefits to those who most appreciate them than in having a one-size-fits-all approach.
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