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A “death knell” has been sounded for defined benefit pension (DB) schemes as a fresh wave of scheme closures has been predicted by a PwC survey of employers.  The survey, which quizzed 179 major employers, found 94 per cent intended to reduce or cut current defined benefit schemes.

Results also revealed that only 6 per cent of companies expected to keep DB pension schemes in their current form, while the number of companies that have shut such schemes to existing employees has more than doubled since last year’s survey.  A further 30 per cent of employers intend to close DB schemes to existing staff, compared with only 17 per cent last year.

One Pensions Partner at PwC, said: “Employers are sounding a repetitive death knell for defined benefit pensions. Numerous factors, including the size and volatility of funding costs, and concerns about the inequality of pensions provision within an employer’s workforce, are accelerating their demise. Companies recognise the value to their businesses and people of providing workplace pensions but not at the risk of jeopardising the business as a whole.”

But solving the problem of the cost of DB schemes raises new challenges for employers, PwC said. The survey shows that 87 per cent of employers believe that employees are not saving enough for retirement and 60 per cent think that their employees will not be able to retire when they want because of this.

The majority of companies asked believed they should be encouraging and facilitating more flexibility in retirement practices.

source: www.peoplemanagement.co.uk