UK - Final salary pension schemes in the UK will cease to exist as defined contribution (DC) and hybrid schemes become the way of the future, new research by The Bank of New York has found.
The recent survey of pension fund trustees, consultants and fund managers at The Bank of New York’s pension fund summit held in London revealed only 3% of delegates believe final salary schemes will continue to be offered to employees in the future.
Some 52% predicted future company schemes would operate on a DC basis and 36% decided a hybrid basis was the most likely alternative, The Bank of New York said.
The majority, 52% of respondents named under-funding and longevity as the biggest issues facing pension fund trustees while 35% said seeking better investment returns was their major concern.
Commenting on the findings, Benjie Fraser, managing director, Bank of New York said: “The future of final salary schemes faces great uncertainty as companies come to terms with the issues of under-funding and longevity.
“As they face up to this challenge, pension schemes are looking at every opportunity to reduce costs and add value. Investment research is one area which is facing closer scrutiny and the jury seems to be out on whether the investment banks will continue to offer this service in the future.”
On investing in alternatives like hedge funds, the Bank of New York found 47% of delegates had chosen this route to diversify their assets while 31% said they were looking for higher investment returns.
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