Speaking at an event hosted by Watson Wyatt, Richard Lambert, director general of the Confederation of Business Industry, claimed high costs on defined-benefit (DB) schemes, along with increased regulation and red tape, are causing a rising number of employers to voice concerns about their future.
Lambert claimed that an increasing levy from the Pension Protection Fund (PPF) and the extension of the powers of The Pensions Regulator over DB schemes are proving too much for some employers.
In addition, the credit crunch and economic slowdown are also contributing to the pressure on DB pensions.
Lambert advised that the Government should take a tougher, risk-based approach to future pensions legislation to give more stability to firms. He also urged that employers should be left alone to design schemes that work best for them.
He said: "Without these steps, we will see a significantly shorter life for DB accrual than we would all hope for. That would be a matter of great regret to our members. And it would also reflect badly on government, which would face the political fallout from its role in the ending of accrual [of DB schemes]."
Nigel Peaple, director of policy at the National Association of Pension Funds, said: "We share the CBI's assessment. While government has taken some steps to deregulate DB pensions, we would like it to go further."
In the past year a number of employers, such as Rank Group and Emap, have sold their final-salary schemes to insurance companies. According to John Ball, head of defined-benefit consulting at Watson Wyatt, this trend could be set to increase. He said: "It took a while for the closure of DB schemes to new entrants to reach tipping point but this trend quickly gained momentum. If a few more high-profile employers close their schemes to future accrual, we could see a snowball effect."
