Steps to reduce pension liabilities

2 hours ago

Only one in five defined benefit pensions is still open to new members, while 16% of companies have closed their scheme to existing ones during the past year, figures has showed.

Companies are continuing to take steps to reduce their pensions liabilities, with only 20% having defined benefit schemes that are still open to new staff, compared with 33% 12 months ago, according to PricewaterhouseCoopers.

There is also a growing trend for firms to close their defined benefit schemes, which include final salary pensions, to existing members, with 16% of companies closing them during the past year and 11% expecting to do so in future.

The findings are in contrast to last year''''s survey, when all companies questioned still had their schemes open to future accruals from existing members, while six months ago just 3% had closed them.

The trend is despite the fact that 88% of firms thought pensions were more important or as important in attracting and retaining staff as they were three years ago.

Marc Hommel, a partner at PwC, said: That companies continue to close their defined benefit schemes to new employees is no surprise, but the trend towards ceasing to provide future accrual of benefits to existing employees shows just how far UK companies are prepared to go to address their exposures to defined benefit pension provision.

The survey of 86 companies also found that 35% of companies are considering a buyout of some or all of their pension liabilities, up from 27% in 2007.

One in five firms said they were looking to carry out a buyout within the next five years.

Larger companies were more likely to be considering this as an option, with 43% of firms employing more than 5,000 people, considering a buyout, with 27% planning one in the near future.

Mr Hommel said: We''''re seeing increasing concern from companies about the volatility of their funding position and the associated impact on their balance sheet and profit and loss - this is particularly true of companies where the scheme liabilities are comparable to the value of the organisation.