Posted on March 13th, 2011 | Categories - Pensions
Final salary pension schemes are closing as rising life expectancies leave them too expensive to maintain.
Half of UK firms will enrol their staff in existing pension schemes when the auto enrolment system is implemented next year.
Almost a fifth of UK firms have closed their final salary pension schemes to existing and new members, according to the National Association of Pension Funds (NAPF).
This marks a 7% and 3% increase from the figures recorded in 2009 and 2008 respectively. Rising life expectancy rates and unstable investment returns, which are making the final pay outs more costly than ever, were cited as reasons for the closures.
Just over 20% of final salary pension schemes are still open to new joiners. A decade ago 88% of schemes were still available indicating the record rate at which the closures are occurring.
Joanne Segars, chief executive of the NAPF, said: “The pressures on final salary pensions are relentless, and their rate of decline seems to be shifting into a new gear”.
She added: .“The rate of closures to new staff seems to have levelled off, but now those who are already in a final salary pension increasingly find themselves being locked out. The results from this survey show there is no time to waste in developing solutions that will support schemes, their trustees, sponsors and members”.
The research also highlighted that 9% of firms plan to reduce their contribution to employee pensions when the new auto-enrolment system is introduced in 2012 in line with the minimum of 3%. A further 4% will be contributed by workers and 1% from the government.
However, just over half of companies said they would put their staff in their existing pension schemes and maintain contribution rates at their current level.