The "death" of defined benefit (DB) schemes has become a global phenomenon as companies struggle to tackle legacy liabilities, PricewaterhouseCoopers (PwC) has said.

The "death" of defined benefit (DB) schemes has become a global phenomenon as companies struggle to tackle legacy liabilities, PricewaterhouseCoopers (PwC) has said.

According to PwC's survey of 114 Fortune 500 global multinationals, 83% said they are closing their DB plans to new employees, and 71% intend to freeze DB accruals for their existing employees.

PwC said that continuing financial strain and volatile impact on companies of supporting DB pensions and healthcare obligations are causing a shift towards defined contribution (DC).

Almost 80% of respondents said they have global retirement liabilities that exceed a third of their group's market capitalisation, PwC said.

Marc Hommel, PwC global pensions leader, said: "In spite of the best efforts of sponsoring employers, DB pension deficits have remained stubbornly on corporate balance sheets.

"The size and volatility of these deficits is concerning shareholders and creditors, and is making multinationals more determined than ever to make difficult decisions and reduce the negative impact on their organisation.

"While the death of DB retirement arrangements is not a new phenomenon in the English-speaking world, it is striking how pervasive this has become globally, even in those countries with the most complex and restrictive regulatory and labour environments. Multinationals are resoundingly rejecting the open-ended financial risks of defined benefits."

Despite the decline of DB schemes, PwC said that 90% of multinationals still want to play a significant role in the provision of retirement benefits to their employees, in order to maintain their reputation as an employer of choice and help them hire and retain the people they want.

PwC said that there is a growing appetite to invest in "new paternalism" where companies are taking responsibility and investing resources to appropriate retirement savings arrangements and to help them make better-informed decisions about their retirement provision.

Hommel said: "Employers recognise that they need to do more to help employees in their retirement decisions, and that they are currently failing in this aim."

He added: "We expect employers to spend more time and money embracing new paternalism as part of their reward strategies. This will be an essential step in creating retirement benefits provision that results in better outcomes for employees and employers alike, within acceptable costs and risks for the employer."

First published 18.02.2014

monique_simpson@wilmington.co.uk