Pension Reforms Must Be Bold To Avoid Collapse

A survey of private sector pensions has found private sector pensions have underwent a "seismic collapse", leading to calls for "bold reforms".

According to the survey by the Association of Consulting Actuaries (ACA), nine out of ten private sector defined benefit schemes are now closed to new entrants, while four out of ten were closed to future accrual.

The survey, which looked at pensions amongst some 468 employers found that only just over a quarter of employers have budgeted for the cost of workplace pension "auto-enrolment", which begins in stages from October 2012.

Overall, the ACA survey found that a fifth of employers were looking to decrease their pension spend, while a third of larger employers said they are looking to decrease spending on pensions.

Commenting on the survey results, ACA Chairman, Stuart Southall said: “Set against this, the Government is at last waking up to the reality of how low morale is in the private sector pensions world and we understand it is looking to produce a paper in the New Year examining how workplace pensions can be ‘reinvigorated’.

"The preparedness of some employers to share risks, echoed by our survey, and the endorsement of this approach by the recent Workplace Retirement Income Commission, needs to be followed up with some urgency as part of this reinvigoration agenda.

“However, it is very difficult to see what can be done to turn the tide in the near-term given the austerity backcloth, coupled with the economic woes we are likely to face for a number of years to come.

Mr Southhall said that a more level playing field as between private and public sector pension provision is clearly a sensible aim but it is possible that the current Government attempts to achieve this have already been undermined by "the seismic collapse" of private sector pensions.

"In both sectors, it seems probable that the later the cure the stronger will have to be the medicine," The ACA Chairman added.

(DW)