Pension Scheme closures at record levels

A record number of final salary pension schemes have closed their doors to future contributions from existing members, the National Association of Pension Funds (NAPF) revealed today.

The NAPF’s latest Annual Survey showed that one in five (17%) schemes have shut their pension to both new and existing members. This was a record jump from 7% in the previous survey in 2009, and just 3% in 2008.

The findings point towards a new phase in the decline of final salary (defined benefit) pensions, as schemes that have already closed to new joiners now look to make restrictions on existing members.Over the past decade, final salary pensions have come under huge pressures due to rising longevity, poor market returns, and red tape.

Just 21% of private sector schemes are now open to new joiners, compared with 88% ten years ago.

The  survey, run in late 2010, shows that further rapid change is on the cards. A third (33%) of schemes are planning changes around their existing members, including cutting benefits or migrating staff to a defined contribution pension.

Joanne Segars, NAPF 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.

“The Government has made an important and welcome commitment to ‘reinvigorate occupational pensions’.

The results from this survey show there is no time to waste in developing solutions that will support schemes, their trustees, sponsors and members.

“Without action now on workplace pensions – and state pension reform – future generations of pensioners will face a poor and uncertain old age”.