Government told save the DB pension
David Woods, January 23, 2009
Over 1,000 defined-benefit (DB) schemes could be forced to close because of the recession.
According to the National Association of Pension Funds (NAPF), 52% of DB schemes could close as, over the past five months, employers reported they are more likely to make changes to their scheme.
As a result, the NAPF has called on the Government to take the same radical approach towards saving pensions as it is towards banking and small business.
NAPF chief executive Joanne Segars said: "These exceptional times call for exceptional measures and new thinking. We have seen bold action from the Government in response to the crisis in other key areas and similar action is now needed for the UK's pension schemes.
"With so many schemes set close to new members and employee confidence in pensions evaporating, this is a now or never moment if we want to see DB schemes remain a key part of the UK's pension landscape."
But Nicola Bumpus, senior associate at Pinsent Masons, warned it is not a simple process for employers to simply close DB schemes. She added: "Employers should bear in mind that such a change is not always straightforward. The attitude of the trustees of the pension scheme is critical, as it is very likely that the employer will need the agreement of the trustees before the pension scheme can be closed.
"Employers should therefore consider what powers the trustees have under the pension scheme rules as these will be significant in the negotiation process."