THE economic downturn is accelerating the shake-up of company pension schemes, with 96 per cent of firms planning to change the pension provision they offer, says research.
Changes are planned to both final-salary and defined-contribution schemes as 68 per cent of companies try to cut costs, say PricewaterhouseCoopers.
Three-quarters of companies said proposed changes to pension tax relief for high-earners, announced
in the Budget, had reduced their motivation to provide any sort of pension.
About 96 per cent of firms said they thought final-salary pensions – under which employers guarantee the size of the pension – were now unsustainable, with three-quarters of companies saying they were considering closing final-salary schemes to existing members.
Four out of ten small firms and a quarter of larger employers also admitted they intended to make the bare minimum contributions to staff pension schemes, namely 3 per cent of pay, once automatic enrolment is introduced in 2012.
PwC said the shake-up in defined-benefit pension schemes was now being extended to defined-contribution ones, as companies re-evaluated the role that pensions played in overall employee reward packages.
Of the 17 per cent of companies still offering final-salary pensions to new staff, only 27 per cent thought they would retain this option, while 42 per cent said they were definitely going to close their scheme to existing members, and 32 per cent were considering doing so.
PwC said only 5 per cent of companies were likely to have a final-salary scheme still open to new staff in five years, while just 22 per cent were committed to keeping their scheme open to existing members.
Around 88 per cent of private sector employers said they thought the public sector had an unfair advantage in being able to offer quality final-salary schemes, while 92 per cent thought pressure would increase on the public sector to close or reduce the benefits offered through these schemes.
Marc Hommel, of PwC, said: "Pensions apartheid is upon us, with a growing gap between the relative generosity of the public sector."
The research, which was based on responses from 157 companies, found that 68 per cent of firms were planning changes to their pension to cut costs and 64 per cent wanted to reduce risk.
TUC general secretary Brendan Barber said: "Companies are using the recession as an excuse to make savage cuts in pensions. But recessions are short term, and pensions are long-term investments that can ride ups and downs in the economy.
"Unions negotiate constructively to deal with genuine pensions' difficulties and longer lives.
"But too many attacks on pensions are no more than companies walking away from a long-term commitment to their staff, and are part of the same short-term profit-seeking that gave us the financial crash.
"Unions stand ready to resist such attacks, but there is little non-union workforces can do."
