Threat to defined benefit pensions

DEFINED benefit pension plans will vanish unless the Government relaxes regulations governing them, Mercer Human Resources has warned.

The warning followed publication of a new study by Mercer showing mounting pressure on employers to close existing defined benefit plans.

The survey found 30% of companies had made changes to their defined benefit plans in the past few years.

A further 30% said they would review their pension plans in the next few years while 40% of defined benefit sponsors said they did not intend to change their pension plans.

The survey also found that 50% of funding proposals for technically insolvent schemes were off-track.

More than half of employers who have changed their defined benefit schemes have closed them and replaced them with defined contribution schemes where workers carry most of the risk.

Mercer’s latest study reveals that in about two years, almost one-third of Irish defined benefit schemes will be closed to new entrants.

Up to 480,000 employees are members of defined benefit pension schemes in Ireland, Mercer said.

Anne Kershaw, senior actuary at Mercer said: “This trend shows that employees who move job are less likely to be included in a defined benefit pension scheme with their new employer. Defined benefit pension schemes will inevitably become the preserve of older, long-serving employees.”