On the go: Almost three-quarters of company reviews of their defined benefit pension schemes resulted in the plans closing to future accrual, according to new research.
Eighty-eight per cent of companies reviewed their DB benefits in 2022, per consultancy Aon’s survey of more than 330 schemes, covering all DB pension benefit reviews until September 2022. For 72 per cent of those companies, the reviews led to closure to future accrual – up from 68 per cent in 2020.
Twelve per cent of employers made no changes, compared with 15 per cent in 2020. Sixteen per cent of employers elected to maintain future DB accrual, but made changes to reduce costs.
Ninety-four per cent of DB schemes are closed to new entrants, Aon said. Of those that remain open to accrual, 22 per cent are open because they have few active members left, with the same proportion citing “regulated industry/protections” for being open.
Aon said many schemes that remain open are in regulated industries where a DB freeze is not possible. Meanwhile, 16 per cent of schemes are open because of employee relations concerns.
The survey also revealed that over the past five years, 15 per cent of closure projects also changed defined contribution benefits for existing members.
Aon partner James Patten said: “Increased closure of DB schemes was a pattern we saw emerge after the 2008 financial crisis and it seems possible that it could be repeated as we go into 2023, with organisations navigating new forms of volatility.
“Furthermore, following the rise in gilt yields, the size of the gap between projected DB and DC benefits for members after DB closure is a lot narrower.
“This all potentially means the news of closure may be less difficult for employees to accept,” Patten continued.
“Given these factors, some employers may therefore take the view that now is the right time to embark on a potentially sensitive project.”
