UK - The shift from final salary to money purchase provision is being halted by "risk sharing" hybrid schemes, a survey by IPN's sister publication, Professional Pensions, shows.
The study – which analyses pension provision among the top 250 FTSE firms, with the exception of investment trusts – found that seven of the top 100 now had a hybrid scheme compared with only one last year.
Among the top 250, a total of 12 now run hybrid arrangements compared with only three in 2002.
Experts say the findings highlight the increasing number of firms which are less fearful of the complexity that surrounds hybrids.
Mercer partner Peter Thompson said: “It is welcome that companies are now willing to place more of the risk with the employees.
“There are several options available to firms, so it is premature to say this is the road they will all take, but it is certainly one way forward that they should be looking at.”
Watson Wyatt partner Alan Pickering (pictured) said hybrid schemes allowed firms to share the risk of pensions provision with employees and had gained favour among employers.
He added: “There is a definite move in firms to risk sharing.
“It seems companies are starting to realise that risk sharing is an ideal way of maximising employer commitment and minimising unpredictable risk. There is no reason why simple hybrid products can’t be delivered because it is misleading to think that hybrids are complex.”
GlaxoSmithKline, Barclays, Astrazeneca, Aviva, Smiths Group, Rentokil and Schroders have all moved from DB or DC schemes to hybrid in the past year (see tables pages 26-30).
But Pickering pointed out that if a company moved towards risk sharing, it needed to provide more financial advice.
The Professional Pensions survey shows that three FTSE100 companies which previously had only run DC plans had now introduced hybrid schemes. The number of top firms which only run occupational money purchase plans has now fallen to seven.
But the move has had the greatest impact on DB provision. Only 38 FTSE100 firms now have an open final salary scheme – down from 47 in 2002.
The number of DB schemes that have closed and been replaced by defined contribution/stakeholder has risen by six to 48.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.