23.01.09

Over Half of Open Final Salary Schemes Could Close to New Members

More than half of defined benefit (DB) pension schemes still open could close to new members as a result of the economic crisis, according to research by the National Association of Pension Funds (NAPF).

In its new Pension Provision and the Economic Crisis survey of 100 pension schemes, the NAPF revealed between July 2008 and January 2009 the number of employers with open DB schemes expecting to switch new employees to defined contribution (DC) schemes more than doubled from 21% to 45%.

Another 7% admitted they expected to switch to some other new arrangement with more risk-sharing, such as a career average scheme. According to the NAPF this means over half (52%) of DB funds – equivalent to 1,000 schemes – could close to new members, and this is expected to happen “sooner rather than later”.

However, the NAPF suggested employers with closed DB schemes are also feeling the effects of the economic crisis as 27% expect to switch existing members to a DC or hybrid/career average scheme.

The report suggests 600,000 members in the closed DB schemes and just over 800,000 members of open DB schemes could be affected by the planned switch to DC pension schemes.

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