A major study into British workplace pensions will today demand radical change to Government policy warning that millions could retire in poverty if no action is taken.
The Association of Consulting Actuaries found that nearly nine in ten final salary pension schemes are closed to new members with a fifth now closed to existing members. A quarter of employers are considering cutting benefits when they have to enrol all staff into workplace pensions while just 6 per cent say Government claims of “supporting” quality pensions are working.
The study did find that contributions into defined contribution (DC) pension schemes – which have replaced final salary schemes - are increasing. However progress was found to be slow and more than half of all DC schemes reporting to the survey said they were attracting employer contributions of less than 6 per cent of earnings and less than 4 per cent from employees.
Given much lower investment returns in recent years and rising longevity, pension outcomes for an increasing number of private sector employees are likely to worsen significantly in coming years, the ACA said.
The ACA further warned that with rising taxes on both businesses and individuals likely to be a feature of the next few years, the situation canonly deteriorate.
ACA Chairman, Keith Barton, said: “These are worrying times for all those looking to retire in the years ahead. Whilst the Government’s Personal Accounts initiative eventually may bring on board more pension savers, it has to be remembered that these accounts are designed to ‘fill the gap’ with a low-level pension, where no better pension scheme exists. Quality pensions require higher contribution levels.”
He added: “Just 6 per cent of employers responding to the survey say they feel the Government’s stated policy of supporting quality workplace pensions is working, down from 38 per ecnt two years ago.
“The huge public policy gap at present is meaningful action to protect good existing private sector schemes and to promote new pension designs that aim to check uncertain and volatile pension outcomes.”