DB costs hitting pay and inter-generational equity, employers say

[TrueBlueTerrier]

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Over half of employers believe the need to fund defined benefit (DB) schemes is affecting their ability to improve employee pay, a survey by the Association of Consulting Actuaries (ACA) has found.
This was leading to lower contributions into newer pension schemes, according to 42%.

Another eight in 10 said these costs were also impacting intergenerational equity, with a slightly higher number (84%) saying the government should change the law to reduce pension increases where there is a "severe" risk to the employer.

The survey of around 180 DB sponsors, conducted over the summer, also found that 79% support increased punishments where a scheme has been mismanaged, an idea floated by Theresa May during the general election campaign in May.

A slightly smaller number (68%) said there should be new criminal offences for directors who ‘deliberately and recklessly' put at risk a scheme's ability to meet its obligations to pay benefits, another proposal of May's.

Yet, just over half (55%) added that further legal restrictions could lead to a higher rate of scheme closures.

ACA chairman Bob Scott said employers were clearly "sanguine" about such a prospect.

"Our survey findings this year paint a picture of DB schemes where complexities introduced over the years - largely by dint of public policy - have taken their toll," he said. "Legislative and regulatory changes seem unremitting and are continuing to present challenges to sponsors and trustees.

"While a majority of employers fear more legal restrictions will accelerate scheme closures still further, they seem sanguine about further legal restrictions being placed on sponsors and trustees in the upcoming government white paper. That said, the vast majority also expect support in the white paper for some greater flexibility in law to adjust future pension increases if they are in financial difficulty."

The responses were revealed in the association's interim report of its Pension Trends Survey, which included responses from 466 employers in total.

Just over half of schemes (52%) reported that restrictions on pensions tax relief had resulted in higher earners leaving their schemes, yet over three-quarters (77%) said the existing tax relief structure should largely remain the same but with more help focused on those with lower incomes.

Scott added: "It is clear the restrictions in reliefs in recent years have made a major impact on pay and benefits strategies at firms, with many senior staff ‘opting out' of pension arrangements as a result. Beyond doubt, this has had an adverse impact on support for schemes within firms, often with those on lower incomes losing out as a result."

Further interim findings will be published next month, with the full report due in November.

[k979aaa]

Well are the managers not employees or even the directors or CEO when it come's to the end of the ladder nothing left not even your once great pension gone on some ones bonus!

[heapsy]

It wouldn't so bad if the investment strategy was right. At least we might have a fighting chance of building a decent pension.