U.K. defined benefit plans are unsustainable in their current form because of associated risks and increasing costs, leading 96% of the employers to consider making some changes to their pension plans, according to a PricewaterhouseCoopers survey.
Of the 157 pension executives surveyed who offered DB plans, 74% are considering taking the drastic step of freezing their DB plans to all future accruals, according to the survey.
Our research shows fewer than one in 20 employers expect their defined benefit pension scheme to be open to new members in five years time, Marc Hommel, partner and U.K. pensions practice leader at PwC, said in a news release about the survey. Only about one in five are saying they will not freeze future benefit accrual for existing members, potentially leaving U.K. businesses with a legacy of zombie pension funds.
About 68% of respondents said they were planning changes to reduce risk, including investment volatility, while 60% wanted to reduce costs. Other reasons for changes include regulatory changes (45%), the recession (30%) and changes in the needs of the overall work force (15%).
Among the respondents, 11% were executives from pension funds with more than £5 billion ($8.2 billion) in assets and 22% were from funds with between £1 billion and £5 billion in assets. The remainder represented funds with less than £1 billion in assets.
The survey was conducted in May.