More than half (59 per cent) of defined benefit schemes which were closed to future accrual in the past five years offered some kind of concession to their members, research has shown.
Aon’s Pension Benefit Design Survey, which polled 317 DB schemes, found 55 per cent of schemes offered enhanced levels of defined contribution as a concession, while half of the schemes maintained ill-health, early retirement or redundancy terms for members.
The survey also found 35 per cent of employers were offering some kind of trade off to savers when closing their final salary plan.
Some 48 per cent of benefit reviews in the past five years had union involvement, which was likely to be a driver for the increase in concessions, Aon stated.
Dave Hughes, head of Aon's benefit design team, noted that "many sponsors are now looking to work with experienced partners to help to pave the way for a positive dialogue with unions regarding the issues faced with ongoing DB provision - and how to find an acceptable solution".
He added: "Our survey demonstrates the creativity being applied to these concessions varying from enhanced ongoing DC contributions, one-off bonus contributions or cash payments, all the way through to one-on-one support from an IFA."
FTAdviser reported yesterday (June 17) that 35 per cent of employers were offering financial advice as part of their workplace benefits, which compared with 12 per cent in the previous year, according to research from financial education provider Wealth at Work.
Aon found from the 317 final salary schemes, 105 pension funds had reviewed their benefits, with 60 per cent now closed to DB accrual – up from 48 per cent in the last survey in 2014. A further 21 per cent of schemes reduced future accruals in some way.
Mr Hughes said: "It is maybe no surprise to see an increase in the number of DB schemes closed to accrual – that’s the trend we have seen for a while now, driven by the high costs of providing DB benefits.
"However, we are now seeing benefit reviews for many DB schemes which were previously put in the 'too difficult box'."
He said there were several reasons for this, as the demographic of the workforce was changing and many employers reached a stage where their DC scheme members significantly outnumbered those in the DB scheme.
He said: "It then becomes a far more natural step to make moves towards harmonising future benefits, with the risk of potential business disruption also being lower than it might once have been."
maria.espadinha@ft.com
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