A new National Association of Pensions Funds (NAPF) survey reveals that defined benefit pension funds are closing their doors to new staff at the fastest rate on record.

The latest NAPF survey revealed that just 13% of defined benefit schemes were open to new joiners in 2012 from 19% in 2011, representing a drop of a third, and is also the steepest fall since comparable data began in 2005, when 43% were open.

Additionally, according to the survey, which covered a total of 1,018 pensions with 9m members and £628bn, these defined benefit schemes are increasingly closing to the workers who are already in them.

The number that shut their doors to existing staff rose over a third from 23% in 2011 to 31% in 2012.

NAPF chief executive Joanne Segars said: "The pressures on final salary pensions have proven too great for many businesses. The growing liabilities fuelled by quantitative easing will have been a factor behind the record hike in closures.

"Those starting a new job in the private sector have next to no chance of getting a final salary pension. What was once the norm is now a very rare offer."

The NAPF argued that pensions have been under pressure due to rising longevity, red tape and poor investment returns, but higher liabilities from quantitative easing and low gilt yields have prompted these latest closures.

The survey also showed that total contributions from employers and employees into the newer defined contribution pensions rose to an all-time high of 12.5% of salary in 2012, which was well above the 8% minimum that auto-enrolment requires.

"We are in the midst of a pension regime change. Auto-enrolment will bring millions of workers into a new breed of pension that will come to dominate in the private sector. It is encouraging that savings into these pensions have reached a new high, despite the tough economic conditions," said Segars.

According to the survey, the few remaining private sector pensions which are still open to all staff will see big changes in the next five years. An astonishing 46% are planning to close the pension to new staff, and offer then a defined contribution pension instead.

A third of those schemes closed to new joiners but still open to future contributions from existing staff said they would make changes in the coming years, including closing the scheme or making it less generous.


First published 28.01.2013

monique_simpson@wilmington.co.uk