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The Actuary The magazine of the Institute & Faculty of Actuaries

DB schemes still closing down

Hewitt reports from its latest client survey that nearly 20% of UK pension schemes have now closed to defined benefit (DB) accrual, with a potential doubling of that figure expected over the next year.

Jackie Daldorph of Hewitt said: “The vast majority of pension schemes have now closed to new entrants, but the pace of closure to existing members is accelerating, with the number of “frozen plans” expected to double in the next 12 months. For companies now embarking on a plan freeze, the issue becomes how to do so, while still keeping the members, their unions, and trustee boards onside.”

Hewitt’s Tony Baily added: “Our survey shows that while many plans are being frozen, employers have not altogether ruled out DB. Employers can often achieve significant risk and deficit reductions through alternative measures to simply moving to a defined contribution scheme. This may involve retaining a final salary scheme but capping growth in pensionable pay, or moving to a career average (CARE) approach. In some cases, this kind of approach may also be better received than freezing the plan.”