More than a quarter of closed final salary schemes will switch existing members to defined contribution plans as a direct result of the economic crisis, research shows.
A survey of 100 schemes by the National Association of Pension Funds found 27pc of employers with closed funds intend to switch to some form of DC or hybrid/career average plan.
The report, [ital] Pension Provision and the Economic Crisis [endital] also found more than half (52%) of DB schemes open to new members expect to close within the next five years as a result of the current downturn.
And the survey suggests workers' confidence in pensions has also evaporated over the past year. In September 2008, at the height of the stock market gyrations, NAPF's Pensions Confidence Index stood at +22%. Three months later, the Confidence Index is barely in positive territory, standing at just +1%.
The NAPF called on the government to take radical action and provide the same bold approach to the pensions sector as it has given to others such as banking and small business.
The NAPF Action Plan calls for measures that will:
Enhance scheme member security by making the government the ultimate guarantor of the Pension Protection Fund.
Build member confidence through joint government/industry information campaigns on the importance of pension saving.
Improving scheme efficiencies to reduce costs (for example, by facilitating scheme consolidation) by government, regulators and the pensions industry working together to mitigate the drags on pension provision.
Ease pressure on scheme sponsors through the greater issuance by government of long-dated gilts which will ease the pressure on scheme sponsor balance sheets and, beneficially, provide government with access to funding at low rates of interest.
Help schemes manage their liabilities by allowing them flexibility in setting their scheme rules on the key issues of retirement ages and indexation.
Help schemes manage their deficits by allowing longer periods over which these schemes can make good funding shortfalls, including pushing back trigger points (that is, the point at which The Pensions Regulator will investigate schemes) from 10 to 15 years. In the current environment this will give schemes some flexibility.
NAPF chief executive Joanne Segars, said: "These exceptional times call for exceptional measures and new thinking. We have seen bold action from the government in response to the crisis in other key areas and similar action is now needed for the UK's pension schemes."With so many schemes set to close to new members and employee confidence in pensions evaporating, this is a now or never moment if we want to see defined benefit schemes remain a key part of the UK's pension landscape."Professional Pensions
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From 6 April 2019