Pension Scheme Closure Figures ‘Unsurprising’

Lawyer Reacts Following Release Of New NAPF Study

29.01.2013

New findings that the number of private sector pension scheme increased across 2012 are not surprising considering the economic climate seen over the past few years, according to a leading pensions expert.

Research from the National Association of Pension Funds (NAPF) revealed that 13 per cent of final salary schemes were open to new recruits, which marked a six per cent drop from the previous 12 months.

The study, which covered more than 1,000 schemes operated by private sector firms, also revealed that 31 per cent of schemes are now closed to existing staff, up eight per cent from 2011.

Nigel Bolton, a Partner and pensions specialist at Irwin Mitchell, said the findings were part of a continuing trend and demonstrated the difficult economic conditions that the private sector has faced over the past three years.

He outlined: “Recent trends have meant many employers simply cannot afford the risk and volatility which is inherent in final salary schemes.

“Risks such as increased longevity and market drops are outside the control of individual employers, and many are no longer financially robust enough to deal with significant increases in deficits. This often means an increase in cash flow out of the business, often when the firm needs this to remain competitive.

“Auto-enrolment covers all employees and again the contribution cost increases have meant many employers have reassessed their scheme provision with a view to long-term affordability. This has resulted in closures to new and existing employees.”