The end of DB pensions for active members edges closer as the closure to future accrual increases apace.
Our annual analysis of defined benefit schemes in the UK with assets over £1bn continues to highlight the decline of DB schemes.
The sixth annual survey, of 230 schemes, continues to highlight the decline in DB schemes, with 53% of final salary schemes closed to new members and 43% closed to future accrual, leaving just 4% open to new members. The number of frozen schemes has risen from the previous year from 37%, as some schemes have discontinued the future accrual of benefits for all members to save costs.
of final salary schemes remain open to new members
of final salary schemes are now closed to future accrual
of schemes have a deficit on their company accounting basis
increase of the median in transfer values
There is a strong focus on transferring risk from the sponsoring employer, which is not surprising as 69% of schemes have a deficit on their company accounting basis.
As members of DB schemes are now able to access new flexibilities, providing they transfer to a suitable DC arrangement, it is hardly surprising that many schemes are experiencing an increase in transfer value amounts paid. Our results show a median increase of 56%, although some schemes saw an increase of over 200% and less than 15% of schemes saw a decrease. A significant increase in the level of cash payments to members is expected in the coming years, whether as part of a one-off exercise or more standardised options near retirement.
"The largest occupational schemes in the UK are an integral part of the economy and strongly influence the behaviour of smaller schemes with respect to developing innovative methods of sponsor support and risk mitigation. The schemes invest substantial amounts of capital in the wider economy and are responsible for the retirement wellbeing of a large proportion of the population."