UK - Companies are failing to minimise the financial impact of their pension schemes despite being aware of the risks involved, Deloitte & Touche claims.
A survey of 171 UK companies carried out by the accountant found that 70% of respondents had changed their strategy to tackle pension risk over the last three years. But a quarter were unsure of the results of the changes.
It said that while 63% of firms which had made changes had opted to close their DB schemes to new entrants, almost two-thirds had done so because they wrongly believed they had successfully mitigated the financial risks.
Partner Orlando Harvey Wood said: “The spiralling costs of providing DB pensions and the FRS17 disclosure requirements have led many firms to close their DB schemes to new entrants.
“But given the long run-off time of current pension liabilities, this policy will only lead to limited risk reduction for most in the short-term.
“Indeed, the closure of a defined benefit scheme often has the effect of increasing the employer’s cash contribution rate.”
The survey also found that although 80% of companies questioned had a business risk management policy, only half had included pensions in the remit, while 28% of respondents did not integrate pension cash costs into financial planning models.
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