UK -More than 40% of firms have closed or are in the process of closing their defined benefit pension schemes, latest research from Aon Hewitt shows.
The consultant’s survey of 300 clients revealed a growing number of schemes are also turning to “flight plans” and buyouts to reduce risk.
Aon Hewitt benefits design specialist James Patten said schemes were taking “pension risk management to the next phase”.
He said: “Just over 40% of the schemes surveyed have either already closed to DB accrual or are currently in the process of closing to future accrual.
“Nearly half of those closed to accrual, and indeed many of those that have not, are now taking pension risk management to the next phase.
“A growing minority is considering, or indeed implementing, ‘flight plan’ strategies to chart a course for reducing pension risk exposure at appropriate times, and/or ultimately fully settling their liabilities with an insurance company.”
Around two-thirds of the schemes closed to further accrual had opened a defined contribution scheme as a replacement, offering the same level of provision for both former DB members and new hires.
The survey also found more than 80% of closures saw employers break the link between past DB benefits and members’ future pay growth.
Patten said members would be worse-off if they did not increase their contributions.
He commented: “As a result, many members would have a reduction in forecast pension, unless they take action to make higher personal contributions.
“Many clients are keen to support members to understand this issue, often by using modellers that show the impact of the changes at an individual level, or by offering alternative generic illustrations.”
Aon Hewitt found the tendency to close DB schemes to future accrual was more prevalent in the technology/IT, telecommunications, professional services and construction industries.
Patten added: “It will be interesting to see whether organisations in sectors that have so far seen fewer DB closures, such as chemicals and pharmaceuticals, energy and oil, or transport and haulage, will look to follow suit in the years to come.”
The Pensions Regulator (TPR) and Labour MP Stephen Kinnock and will listen to the experiences of steelworkers when transferring their pensions away from the British Steel Pension Scheme (BSPS) next week in Port Talbot.
Just Group has acquired a 75% stake in the holding company of Corinthian Pension Consulting in a bid to strengthen its professional defined benefit (DB) advisory services.
The Pensions Regulator (TPR) has exercised its production order power under the Proceeds of Crime Act 2002 for the very first time as part of a fraud investigation.
The ITN Limited Pension Scheme has named Trafalgar House as its administrator for an initial term of five years.