Almost one in five defined benefit pensions schemes have been closed to employees who are already members, a new survey has found.
The study, carried out by the Association of Consulting Actuaries (ACA), showed that 18 per cent of defined benefit schemes, which include final salary pensions, are closed to future accruals by existing staff.
Some 87 per cent of schemes are now also closed to new members.
The trend towards closing schemes to existing members looks set to deepen, with 39 per cent of employers who responded to the survey saying that they are looking at shifting to cheaper pension options.
Of these, some 35 per cent are examining career average schemes, where pension benefits are calculated according to an employee’s average career pay, and 22 per cent are considering a switch to defined contribution schemes that would see staff bearing much of the risk of volatile stock market returns on their pension funds.
Between them, employers and employees are now paying 29.5 per cent of a worker’s earnings into defined benefit pension schemes, up from 15.8 per cent in 2002.
On the other hand, just 11 per cent of staff pay goes into defined contribution schemes.
Keith Baron, the ACA’s chairman, said: “This latest survey confirms all our worst fears about the loss of quality pension schemes and how this is now moving on to a phase where future benefits for existing members are likely to be pinned back as employers struggle to hold down costs.”
The ACA has argued for changes to the pension rules that would enable employers to cope better with the costs imposed by volatile investment markets, inflation and longer life spans.
It wants to see employers given the flexibility to move into hybrid schemes that balance both pension guarantees and the risks of investment.
A majority of the employers polled in the survey conceded that employees were reluctant to shift to stock market based schemes.
Mr Barton added: “It is very clear from the survey that employers do not think employees want to take on the risks inherent with defined contribution.
“If we are to preserve as much private sector defined benefit provision as possible then the government must act during 2010 to free up pension designs, so employers can better control defined benefit costs whilst continuing to provide a more stable pension outcome than is possible with defined contribution.”
