Private pensions system is facing crisis as final salary schemes are scrapped

THE private pensions system is in crisis with virtually all final salary schemes now closed to new entrants, according to the Association of Consulting Actuaries (ACA).

A survey of 309 employers published by the ACA showed that nine out of 10 defined benefit schemes have shut the door on new employees.

The data also showed that 91 per cent of such schemes were in deficit.

Meanwhile 59 per cent of employers said they are set to review their pension provision before 2012 when the National Pensions Savings Scheme (NPSS) is due to begin. The Department for Work and Pensions claims its pension reforms will mean 11m workers being given the chance to save with a new minimum employer contribution.

But only two per cent of employers said they feel the government’s stated policy of supporting quality workplace pensions is working – down from 38 per cent two years ago. ACA chairman Keith Barton said these were “worrying times” and called for a “radical change of approach”.

He added: “Our survey found that three-quarters of employers feel their employees are uncomfortable in taking on the entire investment, inflation and longevity risks that come with defined contribution schemes.

“However, this is exactly what is happening as defined benefit schemes are being replaced with defined contribution.”