UK - An increasing number of UK employers are adopting risk-sharing defined benefit scheme designs, according to consultants Watson Wyatt.
A biennial survey of over 200 UK pension schemes revealed that the number of employers moving to alternative, risk-sharing designs had risen to 6% in 2004 from 2% in 2002. And, the firm says, many more may well consider this option over the next few years.
Colin Singer, a partner at Watson Wyatt said: The pace of change to employer-sponsored pensions has been incredibly fast. But while the well-documented trend away from final salary pensions and towards defined contribution continues, perhaps the more significant finding is the number of employers who are moving to alternative, risk-sharing designs such as career average and cash balance.
“Our research also found that while the benefits under these plans are typically less generous than those under final salary schemes they are popular with employees, with 80% of employees eligible to join doing so compared with 65% under defined contribution plans.
The survey also found that of those employers who had final salary pension schemes open to new entrants two years ago, 30% had closed them to new entrants and introduced DC arrangements.
Around 8% had closed them to new entrants and introduced career average or cash balance arrangements, while 16% had kept them open to new entrants but reduced benefits or increased member contributions. 46% of employers had made no changes and the final salary scheme remained open to new entrants.
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