Survey Finds UK Employers Bailing on Pensions

January 4, 2008 ( - A survey by the National Association of Pension Funds (NAPF) found 15% of companies which have so far kept open their defined benefit scheme expect to close it to new entrants, and 22% said they would limit their benefits to cap the cost or risk.

According to Reuters, the survey showed that 40% of DB scheme sponsors did not expect to change pension arrangements for new employees in the next five years, but 22% said they did not know or declined to say how they would change pension benefits to new entrants.

NAPF found 31% of private sector companies have kept their DB schemes open, down from 33% in 2006.

NAPF previously expressed its view that the government’s pension reform proposal, which calls for the establishment of a national pension savings scheme (see UK Issues Formal Pension Reform Proposal ), could provide a disincentive for employers to offer generous pension benefits (see UK Group Says Pension Proposal Could Undermine Generous Employer Contributions ). The group suggested only offering the national scheme to individuals not already covered by an employer plan.

The Purple Book, a report from the Pensions Regulator and Pension Protection Fund (PPF) of the picture of the UK’s final salary pensions universe, indicates 64% of schemes in the 2007 sample were in deficit with a total deficit of £34.4 billion as of March 30 (see 64% of UK Final Salary Pensions in Deficit ).