Rush to end final salary pensions eases
( AP )- The stampede to close final salary pension schemes has eased and may finally be over, according to the latest annual survey from the National Association of Pension Funds.
Two-thirds of defined benefit pensions are now closed to new members and about 5 per cent are closed to further contributions from existing members, according to the survey, which tends to cover the bigger funds.
Nonetheless, workplace pensions appear to be "finding a new equilibrium", said Joanne Segars , the NAPF's chief executive.
But that would still depend on the government honouring promises to reduce the costs of running such schemes, she said.
Ministers have promised to reduce the inflation-proofing for people who switch companies and leave pension pots behind, to simplify pension law, and to make it easy for companies to keep their existing schemes open as automatic enrolment to pension schemes takes effect in 2012 with the arrival of the new system of personal accounts.
"The overall picture shows that the pension landscape is stable, although the operating environment for occupational pensions is tough and is likely to get tougher," Ms Segars said.
The survey showed that 31 per cent of private sector defined benefit schemes remained open to new members in 2007, down 2 percentage points from 2006.
About two-thirds of employers expected to keep these open in their current, or modified, form during the next five years.
Modifications could include higher employee contributions, later pension age, a move to hybrid schemes, or a shift to schemes that pay out on career average earnings.
But 40 per cent expected to make no changes during the next five years. Only 15 per cent expected to switch new employees to defined contribution or money purchase pensions - the key trend of recent years - and just 1 per cent expected to close their scheme to current workers.
The big reduction in pension fund "black holes" had helped to change the landscape, the NAPF said. More than 90 per cent of schemes reported they were fully funded.
But three-quarters of schemes believed the introduction of personal accounts would have an impact and Ms Segars said she was not convinced that all of them had yet taken that fully into account. Most companies will face a bigger pension bill as auto-enrolment is expected to boost the numbers taking a company pension.
Some pension advisers have projected a rise in buy-outs now that schemes are closer to being fully funded, not just on an accounting basis but on the basis that they can fully out pay out their pension promise.
Under a buy out, companies sell off the fund and its liabilities to insurers - usually, initially, the part that affects pensioners rather than current employees. "We may well see some of that, particularly partial buy outs for big schemes," Ms Segars said.