Just 3% of large defined benefit (DB) pension schemes accept new members, new research has discovered.
Barnett Waddingham’s fifth annual Big Scheme’s survey of final salary funds owning assets worth more than £1bn found that 60% of such schemes in the UK are closed to new members. Another 37% are also closed to future accrual.
However, 29% of career average revalued earnings (CARE) schemes welcome new business, although the number of these schemes closing is increasing year-on-year.
Other highlights include the number of under-funded schemes is falling. In 2016, 67% of those surveyed carried a deficit, compared to 57% in this year’s report.
The average contribution made by sponsors of large DB schemes was £60m, with deficit contributions ranging from £750,000 to £338m.
These contributions helped push average funding levels to 98%, a marginal increase in 12 months.
Barnett Waddingham partner Andrew Vaughan said the private sector’s big schemes are the industry’s trendsetters.
“Only a handful of big defined benefit schemes with assets over £1bn remain open to new members and the number closed to future pension accrual is increasing year on year,” he added.
“Many of these will ultimately be looking to the insurance market to transfer risk through buy-outs or buy-ins, medical underwriting and longevity risk transfers. We have seen a significant amount of activity in these markets in the last year and we expect this to continue.”
Other findings included transfers out of the 10 largest schemes surveyed, which each have assets worth more than £10bn, reached 80%.
Meanwhile, the average three-year investment return was 7.6% a year, while asset allocations to pooled funds and alternative assets, such as hedge funds, derivatives and emerging market currency, has increased. The result is that allocations to equities have fallen.
