96 per cent of companies believe DB plans are unsustainable
The vast majority of employers in the United Kingdom plan to radically reduce future pension provisions, according to a new survey.
The survey of 157 U.K. employers by PricewaterhouseCoopers found 96 per cent of them are planning changes to their workplace pension plans, be they defined benefit (DB) or defined contribution (DC).
Employers cited concerns about risk, the need to reduce cost and the country's 2009 budget, which included scrapping tax breaks for pension contributions by high-income earners and an increase in the state pension benefit, as key forces for change.
Nearly all employers (96 per cent) believe DB pensions are unsustainable, with 74 per cent considering ceasing all future accrual for existing employees. Also, 88 per cent of private sector employers say the public sector has an unfair advantage in being able to offer quality DB plans.
The survey also found 41 per cent of employers with fewer than 5,000 employees and 25 per cent of employers with more than 5,000 employees intend to offer the bare minimum under auto-enrolment as of 2012.
Only about five per cent of respondents expect to have a DB pension open for new employees in five years' time and only 22 per cent are committed to maintaining future benefit accrual for existing plan members.
“Future generations will have to do far more for themselves relative to those people who have been lucky enough to belong to a fast-disappearing, defined benefit scheme," said Marc Hommel, partner and U.K. pensions leader at PricewaterhouseCoopers.
Hommel also warned of a growing gap between public sector and private sector pensions, with more than one-third of private sector employers planning to only offer the bare minimum under the 2012 auto-enrolment pension requirements.
“A combination of the 2009 budget proposals and the recessionary economic environment are accelerating the shake-up in U.K. workplace pension provision. Employers are conducting wholesale reviews of the role of pensions as part of their employment deal," said Hommel.
