The closure rate of defined benefit schemes eased slightly this year with 12% remaining open to new members in the private sector, the National Association of Pension Funds has said.
For its annual survey on UK occupational pensions, the NAPF polled 1,300 pension schemes and found DB closures fell by 8% on the previous year, compared to a drop of almost a third between 2011 and 2012.
Its survey also revealed that the proportion of schemes closed to new members, but open to future accruals, dropped from 55% to 53% last year, but the number closed to both new members and accruals rose from 31% to 35%.
Joanne Segars, NAPF chief executive, said pension funds were already 'grappling' with huge economic and longevity issues. She added that although it was good to see a slower rate of DB scheme closures this year, they still face significant challenges.
'Of the DB schemes open to new members or future accruals that responded to our survey, 88% are still contracted out, representing a membership of nearly two million people. They face uncertainty about how the state pension reform will affect them, for example the significant additional costs from the loss of the National Insurance rebate,' said Segars.
The survey also found a 37% increase in defined contribution members from 2012. An average of 13 different investment funds were offered to members, with nine out of ten offering a default fund. Investment funds were found to review their default fund every three years.
Most schemes (91%) imposed some form of charge on members, with annual management fees for DC schemes averaging 0.46%. Segars noted that it was important that charges be both transparent and reasonable.
The NAPF also found that three quarters of respondents told members about the open market option for annuities, up from 68% in 2012.
Elsewhere in the survey, the NAPF highlighted the appetite for de-risking, which continued to grow among DB schemes. It observed that in an economic climate of long-term low interest rates, funds were now considering new ways to broaden their investments.
The NAPF said four out of ten DB respondents increased their interest for liability matching assets in the last 12 months. Over a third of DB schemes had invested in commercial real estate and a further 11% had considered it. Almost a quarter of DB schemes had made some investment in infrastructure and a further 18% had considered investing.
The association has argued that it should be easier for institutional investors to invest in infrastructure as an asset class. It has welcomed the government’s national infrastructure plan 2013, but said a pipeline of assets that are suitable investment vehicles for pension funds must be provided.