Tuesday, January 3, 2012

ACA survey, Pensions gap widens in 2012

ACA survey, Pensions gap widens in 2012 ; The gulf between private and public sector pensions is set to grow this year, according to a survey from the Association of Consulting Actuaries.

The 37-page 2011 pensions trends survey found nine out of 10 private sector defined benefit schemes are now closed to new entrants and four out of 10 closed to future accrual.

It showed more than 5m public sector employees are still being offered DB pension schemes, compared to fewer than 2m private sector employees now in largely closed schemes.

Stuart Southall, chairman of ACA, said: “The government is at last waking up to the reality of how low morale is in the private sector pensions world.

“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.”

According to the survey, 25 per cent of private sector employers are now looking to buy-out or buy-in all their DB scheme liabilities in the next five years, rising to 40 per cent within a decade.

Only more than a quarter of employers have budgeted for the cost of workplace pension auto-enrolment which begins in stages from October 2012.

Roughly three-quarters of employers said they are likely to auto-enrol all employees into their existing workplace pension schemes.

Another 27 per cent said they are likely to review their existing pension benefits to mitigate the cost of higher scheme membership.

Mr Southall said: “Auto-enrolment, beginning later this year, should widen private sector pension coverage, particularly where no pensions are offered at present.

“But the fact the government had to delay its introduction for smaller employers, because of the deteriorating economic climate, is discouraging.”

In all three areas of investment, longevity and inflation risk, at least half of the employers said employers should share or take on a majority of these pension risks.

A fifth of employers are looking to decrease their pension spend, compared to 14 per cent aiming to increase spend.

A third of larger employers said they are looking to decrease their spend on pensions.

Mr Southall added: “Inevitably, any fresh initiative to boost pension savings will require both an easing in regulatory controls and, in all probability, new incentives to encourage employers and employees to take up the challenge and opportunities.

“The government needs to be bold in helping private sector employers so they can consider new ways to boost pension savings over the mid- to longer-term and public sector pensions are not far better.” For the latest updates on the stock market, visit Stock Market Today
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