The rate at which private-sector final salary pension schemes are closing has accelerated.
According to the National Association of Pension Funds (NAPF), some 17 per cent of schemes were shut down in 2010, up from the 7 per cent closed in the previous year and the 3 per cent that came to an end in 2009.
The NAPF report warned that around a third of employers, with schemes still open to new recruits, have plans to close their schemes or to reduce the level of benefits.
It highlighted what it deemed “a new phase in the decline of final salary pensions”, just as increasing number of schemes that are already closed to new entrants are now curtailing the ability of existing members to accrue additional benefits.
The survey covered 292 private sector employers managing between them 2.043 schemes.
A mere 21 per cent of private sector final salary schemes are now open to new recruits. Ten years ago that figure was 88 per cent.
Elsewhere in the survey, there were signs of a marked move to safer investments on the part of pension funds. More and more seem to be forsaking equities for government bonds or gilts, and other assets offering a fixed income.
Between 2009 and 2010, investment in Government index-linked gilts climbed from 7.9 per cent to 12.3 per cent. Pension fund monies in equities, on the other hand, slid by a quarter in the five years from 2005 to 2010.
Joanne Segars, NAPF’s chief executive, said: “The pressures on final-salary pensions are relentless and their rate of decline seems to be shifting into a new gear. 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.
“Many people will feel aggrieved that they can no longer build their final-salary pension up. The alternative on offer could still provide a good retirement, but only if contributions are set at the right level.”
