UK - The rising cost of meeting the minimum funding requirement is the main reason why engineering firms are closing final salary schemes to new members.
A survey of 559 engineering firms by Aon Consulting found that 200 had closed their final salary scheme to new members since its last survey in 1998.
The survey found that 112 schemes have closed since 1999, including 55 this year – the highest number in a single year.
The survey – conducted in association with the Engineering Employers’ Federation – also found that 80 companies had frozen or wound-up their final salary schemes, while 54 had cut the benefits of existing final salary scheme members. The total value of the schemes surveyed by the consultant is approximately £30bn.
Aon said the primary reason behind manufacturers closing their final salary schemes was the cost of meeting the MFR. After that, employers blamed falling investment returns, then administration costs.
But FRS17 was listed as only the fourth most common reason for firms closing their schemes to new members, despite it being blamed publicly for a number of scheme closures.
Aon added: “The clear message to policy-makers is that the coming together of a wide range of issues, at a time when market returns have sharply declined and we are all living longer, is placing occupational provision, and in particular, final salary schemes under intolerable financial pressure.”
EEF deputy director of employment policy, David Yeandle, said: This survey sends a clear message that, at a time of falling stock market returns and increasing life expectancy, companies are unfortunately facing little choice but to reluctantly close their final salary schemes.
“The Government must respond quickly and positively, with action not more words in next week's Pensions Green Paper, if the threat to the UK's long-established system of occupational private pension provision is not to become terminal.
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