UK DB Plans Closed, More to Follow

June 13, 2002 ( - One in five UK defined benefit plans is now closed to new members, with more closures imminent, a new UK study finds.

According to the survey of 269 UK public and private pension plans, the situation is direr at the small end of the market with a third of small plans, those with assets up to  £50 million, shuttered.

The 2002 Survey of Occupational Pension Plans published by The Pension Fund Partnership and MRM Projects Limited predicts that 20% of companies still running a DB plan next year will close its doors to new employees.


Also, the study said that corporate bills for DB company contributions are more than 14% of a firm’s salary pool – a 2% rise from last year.

When looking at the plans’ funding position, 25% of respondents have a funding level of below 100%. The average equivalent funding position for the public sector plans is even worse. More than half of public plans are less than 100% funded, including 30% that are less than 90% funded, the study said.

In addition, various aspects of legislation are seen as the major challenges facing the pension industry. The complexity of pension law, mentioned by three quarters of respondents, and its intrusiveness, cited by one third, are compounded by “the unpredictability of government decisions”, noted by almost half the plans.

Further Findings

The survey also revealed that:

  • in addition to the cost of basic funding, over 40% of plans are now concerned about the expense of running the plan,
  • over half the plans are also concerned about the introduction of the new FRS17 Accounting Standard, which sets down the way in which pension liabilities must be reported in company accounts, and
  • over a quarter of companies with defined benefit plans have now also established defined contribution plans for part of their workforce.