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Administration December 3, 2004
More UK DB Plans Closed to New Members
March 24, 2003 (PLANSPONSOR.com) - More than 70% of
UK final salary pension plans have slammed shut their front
doors to no longer admit new members while another 9% won't
even take contributions from existing participants.
Reported by Fred Schneyer
The Association of Consulting Actuaries (ACA) said that the trend has “accelerated disturbingly” over the past few months with 17% of the closed plans having been shuttered over the last six months, according to news reports. The ACA predicted in a report that fewer than 15% of the final salary plans would permit new investors within two years if the current pace of closings kept up, according to news reports.
During the past five and a half years nearly a quarter of UK firms have migrated from a defined benefit program to set up defined contribution plans. Under these, they guarantee only how much they will pay into a plan, and not what it will be worth at retirement.
Around 11% have set up a hybrid plan, which is part final salary and defined contribution. Another 4% have set up career average plans, which guarantee retirement payments, but base them on employees’ average earnings rather than their final salaries.