News In Focus
24 June 2009
Accounting firm predicts pensions shake-up
A large majority of companies are planning changes to their pension schemes, whether defined contribution or defined benefit, according to accounting firm PricewaterhouseCoopers (PwC).
On the day that the Pensions Regulator issued guidance reinforcing the protection of pension benefits already accrued in defined benefits pension schemes, PwC published a survey that confirms employers plan to radically reduce future pension provision.
Among its findings were:
- Over three-quarters (77%) say that the Budget’s pensions tax proposals have further reduced their motivation to provide workplace pensions, whether defined benefit (DB) or defined contribution (DC);
- 96% of all employers also now think DB pensions are unsustainable, with three-quarters (74%) considering ceasing all future accrual for existing employees (42% definitely and 32% possibly);
- 41% of smaller employers (those with less than 5,000 UK employees) and 25% of larger employers (those with more than 5,000 UK employees) intend to offer the bare minimum under auto-enrolment from 2012;
- 88% of private sector employers say the public sector has an unfair advantage in being able to offer quality DB schemes.
Many PwC clients are conducting wholesale reviews of overall reward strategies and the corresponding role of pensions, with a wider range of options being considered for delivery of long-term savings.
Marc Hommel, partner and UK pensions leader at PwC, said: “Our research shows fewer than one in 20 employers expect their defined benefit pension scheme to be open to new members in five years’ time. Further, only about one in five are saying they will not freeze future benefit accrual for existing members, potentially leaving UK businesses with a legacy of ‘zombie’ pension funds.”