UK - The shift from defined benefit (DB) to defined contribution (DC) schemes is slowing down, a new study reveals.
Jardine Lloyd Thompson’s fifth annual survey predicts that DB schemes are set to “tough it out” and reverse the current perception that the sector is facing a slow death.
Jardine Lloyd Thompson technical director June McIntosh said: “The survey shows slowing down of the DC population. A lot of employers are taking a step back from the liability transfer benefits of DC schemes.”
JLT said that this slowdown was because:
• All DC schemes required basic adjustments in order to make the best of the environment.
• The realisation that DC was not a global panacea.
The survey added that the uptake of DC was slower than the original take-off period and that while DB was not best suited to the current environment, it did still have benefits.
McIntosh added: “Employers are showing a reluctance to take away DB from their employees as there is a reluctance to downsize this employee benefit although the financial implications might force their hand.”
Other reasons for the slowdown of DC uptake include communication difficulties and the current economic climate.
McIntosh said: “We have seen that the transfer from DB to DC is a difficult concept to communicate. The loss of a guaranteed income on retirement in switching to DC is something not all employers want to give up.”
McIntosh continued: “DB schemes still remain the Rolls Royce of pension schemes offering a generous income for the rest of your life. It is still the best benefit you can get.”
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