Only 10% of defined benefit funds in the U.K. remain open to new participants, down from 21% one year ago, according to the Pensions and Lifetime Savings Association's latest survey.
The 42nd annual survey by the trade body found that the decision to freeze pension funds was attributed largest to rising costs, economic volatility and low interest rates.
The cost of running a defined benefit fund in the U.K. has increased 37% in one year. The survey found that costs have increased to £546 ($681) per participant from £400 in 2015. The primary driver is increases in investment management and custody costs, which have increased 32%.
Pension funds with 5,000 or fewer participants have seen the greatest increase in costs, averaging 63%, jumping to £787 per participant.
“Higher operating costs, especially for smaller schemes, combined with widening deficit levels mean DB schemes are under pressure as never before,” said Joanne Segars, CEO at the PLSA, in a statement accompanying the survey data. “We can't ignore the resulting risk to members' benefits for all but the most strongly funded schemes, and for these members the risk is they will lose 15% to 20% of their benefits.”
The survey also looked at defined contribution plans, finding that the average employee contribution rate remains at 4.2%. Employer contribution rates fell slightly, to 7.9% in 2016 compared to 8% in 2015.
The survey was conducted between June 6 and July 29, with 218 responses representing 31% of PLSA pension fund members. Of those responding, 164 had DB funds and 152 had DC plans.