Reuters reports that the National Association of Pension Funds found that more than half of 400 firms polled no longer allow new employees to join final-salary, or defined benefit, pension plans. Some 57% of private-sector final-salary pensions are no longer open to new employees, according to the Association’s report.
Thirty seven responding employers closed their DB plans to new hires in 2005 and 36 plans were closed to new hires in 2004. The survey drew responses from pension plans with a total of 9 million members and aggregate assets of over £370 billion, according to Reuters.
Just as in the US, many UK pension plans report large shortfalls between assets and their estimated obligations for benefits, Reuters says. The reasons are the same as well: an aging population, low bond yields, and modest stock market returns.
After a series of pension fund failures, the UK government set up the Pension Protection Fund, an insurance agency similar to the US Pension Benefit Guaranty Corporation (See Britain’s Answer to PBGC Opens for Business ). In addition, the government set up the Pension Regulator to police the pension industry (See UK Regulator to Seek Out At Risk Pensions ).
A special commission appointed by the government and chaired by Merrill Lynch Europe Vice Chairman Adair Turner is scheduled to present recommendations for pension reform to the UK government on November 30 (See UK Commission Favors Auto Enrollment ). One recommendation expected is the extension of the UK retirement age to 67 (See Report: Raise UK Retirement Age to 67 ).