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Defined-benefit pensions scheme closures have doubled since 2009, according to PricewaterhouseCoopers report

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Closures of defined-benefit pension schemes are set to surge, affecting thousands of UK workers, new research reveals.

A survey of 179 major employers by PricewaterhouseCoopers (PWC), including 34 with more than 10,000 employees and 38 of the FTSE 100, found 6% of companies expect to retain defined-benefit pension schemes in their current form.

The number of companies that have shut defined-benefit schemes to existing employees has more than doubled since last 2009's survey, from 14% to 32%. A further 30% of employers intend to close defined-benefit schemes to existing staff (this figure was just 17% last year).

The survey indicates that defined-contribution pensions are becoming the prevalent type of workplace pensions, with little interest in retaining any form of defined-benefit or risk-sharing arrangement. Almost all employers expect to use defined-contribution arrangements to comply with auto-enrolment, when it becomes compulsory from 2012. Alarmingly, most employers (69%) do not yet fully understand the cost and other implications for their businesses of auto-enrolment.

But 87% of employers believe that employees are not saving enough for retirement and 60% think that their employees will not be able to retire when they wish due to insufficient savings. The majority of companies surveyed believe they should be encouraging and facilitating more flexibility in retirement practices.

Marc Hommel, pensions partner at PwC, said: "Employers are sounding a repetitive death knell for defined-benefit pensions. Numerous factors, including the size and volatility of funding costs, and also concerns about the inequality of pensions provision within an employer's workforce, are accelerating their demise. Companies recognise the value to their businesses and people of providing workplace pensions but not at the risk of jeopardising the business as a whole."

"While employers cannot shoulder all the burden of responsibility for an ageing population with insufficient retirement savings, they will undoubtedly be impacted by these forthcoming socio-economic problems. Those employers that can facilitate retirement saving in an easy, understandable and flexible way will be best placed to ride these longer-term challenges."

PwC's research highlights employers' concerns about the higher-earners pension tax. Seven out of 10 (70%) of employers participating in the survey believe the result of the higher-earner tax will be lower employer pensions provision for all people in the workforce; while 74% are concerned about the administrative and compliance burden, which they believe could cost between £800 and £6,000 per affected employee.

Hommel added: "Employers are telling us that the higher earners' pensions tax, to be effective from April 2011, has destroyed their trust in the durability of the pensions tax framework governing all pensions. They are also deeply concerned about the compliance and administrative burdens. We await the 22 June Budget to see if the new coalition Government intends to repeal or simplify this in any way."