UK Pension Plan Participation Drops Slightly

December 6, 2006 ( - Pension participation in the UK dropped 1% over the last year, as employers continued closing their defined benefit plans to new participants because the plans cost too much.

The Office for National Statistics (ONS) reported a decline from 40% of worker participation in pension schemes in 2004 to 39% in 2005, with most of that decline attributed to the falloff in DB scheme participation that saw a 4% decrease, according to the BBC.

With the decline in the number of DB participants is a rise in the number defined contribution or money purchase plans from 10% in 1997 to 15% in 2005.

“At a time when we can expect to live longer, many employers have walked away from providing a decent pension,” said Brendan Barber, the general secretary of the UK’s Trades Union Congress, the BBC reported. “And while it’s welcome that the government is to force all employers to contribute to pensions, that will not start for another six years.”

The rise in cost of defined benefit plans in the UK was acknowledged by financial services firm Alexander Forbes Financial in mid-November, when it predicted that 46% of the country’s DB schemes will collapse by 2011, partly attributed to higher costs brought on by the passing of the Pension Act of 2004 (See UK Pension Report Makes Grim Prediction for DB Schemes ). That increase in cost could be even more amplified for companies if the Pension Protection Fund decides to hike the levies farther to cushion its £343 million deficit (See UK Pension Protection Fund Could Hike Levies to Cover Deficit ).

According to the BBC, the ONS report also revealed that the average age of retirement is still rising in the UK, showing that the age at which men stopped work was 64.2 and for women the average age of retirement was 61.8 years old.