Business

Closure of final-salary pension schemes stalls

Calculator, pen and paper

The rapid closure of final-salary pensions to new members over the last decade appears to have stalled in the last year, a regulator suggests.

The proportion of defined-benefit pension schemes, including final-salary schemes, open to new employees dropped from 43% in 2006 to 13% in 2015.

But the Pension Protection Fund said closures had "levelled off" this year.

It described the latest figures as a "significant moment", but said the stability might not last.

'Stability'

Companies have been closing more generous defined-benefit schemes to new staff over the last decade, owing to spiralling costs as people live, and draw their pension for, longer.

Some 64% of these schemes can still be paid into by existing members, but relatively few are open to new employees.

"Employees still in defined benefit schemes know that they would be unlikely to get the same deal in a new job. It is no surprise if many are choosing to stay put," said David Robbins, senior consultant at Towers Watson.

The joint report by the Pension Protection Fund and the Pensions Regulator said that "after a decade of dramatic decline", there was now a period of relative stability in terms of closures and membership.

The drop in active membership of these schemes, of 3.4% in the last year, was the smallest fall on record.

New rules mean that those aged 55 and over can withdraw cash from some investment-based pension schemes rather than buy an annuity. The regulator said the impact of these changes would not be known until it publishes the next edition of its annual review in 12 months' time.

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