Growing Pressure On Private Sector Defined Benefit Pension Schemes
According to new research conducted by MORI for the National Association of Pension Funds (NAPF), the rate of closure of private sector final salary schemes has slowed considerably. In the 2004 survey it is reported that 10% of such schemes have been closed in the past 12 months, a figure less than half that seen in 2003 (26%) and similar to the level of 2001. The suggestion is that most of those final salary schemes that are likely to close to new members have now done so.
According to new research conducted by MORI for the National Association of Pension Funds (NAPF), the rate of closure of private sector final salary schemes has slowed considerably. In the 2004 survey it is reported that 10% of such schemes have been closed in the past 12 months, a figure less than half that seen in 2003 (26%) and similar to the level of 2001. The suggestion is that most of those final salary schemes that are likely to close to new members have now done so.
There are millions more people with a claim on pension schemes than are actively contributing to their value. The survey suggests that as many as 3.65 million more people have a claim on pension schemes as are 'putting in.' For final salary schemes there are 3.3 million active members as compared to 6.4 million pensioners or deferred members.
Overall take up of pensions is stable with three-quarters (74%) of eligible members either choosing to join their employer's main scheme, or deciding to remain a member having been automatically entered. The take up of pensions is relatively low within such sectors as retail, distribution, hotels and leisure.
The cost of closed DB schemes to those whose main open scheme is a DC one appears to be rising. This would seem to be a consequence of the growing imbalance between active and deferred / pensioner members, something that has the potential to be particularly acute for closed schemes.
Communication of pension information to members is taking place through a changing set of communication channels. Use of call centres/help-lines appears to be in decline, while use of intranet/internet websites is increasing. Although we do not yet have trend data, we will continue to monitor newer means of communication, such as via payslips (used by 28% of respondents), as these develop.
The cost of pension provision to employers continues to be seen as on the increase. 81% of DB scheme providers foresee funding difficulties around their DB schemes, and many have already taken action to address this. Raising employer contributions, closing DB schemes and opening a DC scheme are actions that have been taken by a number of providers. The emphasis of future changes is likely to shift towards raising employee contributions, raising retirement ages and reducing future benefit accruals.
Technical details
The survey covers the views of 412 NAPF Members representing over 1,000 workplace pension schemes with combined assets in excess of 163380bn. In total these schemes cover around 7.4million active and deferred members and 3.9million pensioners. Fieldwork was conducted online between 23 July and 8 October, 2004.
The NAPF is the leading voice of workplace pension provision in the UK . Some 10 million working people are currently in NAPF Member schemes, while around 5 million pensioners are receiving retirement income from such schemes. NAPF Member schemes hold assets of some 163700bn, and account for around one sixth of investment in the UK stock market.
