UK - Nearly two-thirds of Britain's biggest firms no longer offer final salary pensions to new members, a survey by Mercer Human Resource Consulting shows.
The research – which looks into FTSE350 annual reports with a December 31 year end – showed that the number of companies with schemes open to new members has fallen to 40% from nearly 66% a year ago.
Mercer also found that only 25% of companies are yet to open some sort of money purchase scheme, compared with 45% last year.
Mercer Human Resource Consulting European partner Tim Keogh said: “Significant numbers of employers have sought to cut costs by closing their final salary schemes to new entrants.
“Such measures will help reduce future liabilities but will have little effect on current deficits.”
The FTSE350 research shows the median funding level of schemes has fallen from 91% last year to only 74% this year based on the FRS17 accounting measure – equating to a loss of 4% of the market capitalisation of these companies.
Mercer estimates that the aggregate FRS17 deficit for FTSE350 companies is about £90bn, including £77bn in the FTSE100.
But it says if overseas liabilities are excluded and non-FTSE350 companies recognised, these figures can be extrapolated to give an FRS17 deficit of around £150bn for UK schemes as a whole.
And this figure becomes £300bn if consideration is given to the cost of winding up schemes by securing insurance policies, or converting to insurance companies in the case of the largest schemes.
Mercer’s research also shows that the median pension cost has risen from 6% to 8% of pretax profits over the year.
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