A survey of over 1,600 pensions experts, conducted by Pensions & Investments in collaboration with Oxford University, has revealed that defined benefit pension plans will not die out, but will need to be amended to remain viable for corporations to sponsor them.
The practicalities of the survey allowed experts to voice solutions and to address the growing issues surrounding pensions in the UK, such as not having enough assets to pay benefits to vested participants, also known as underfunding, rather than pass them onto future generations.
Gordon Clarke, a professor at Oxford in England, suggested that corporate pension plans need to be restructured dramatically, with benefits restricted to only what the corporate sponsor can afford to provide, in order to survive.
Furthermore, Mr Clarke stated that plans may only be open to certain sectors of the workforce. Such fixes are necessary because the experts surveyed agreed that defined benefit plans are a drag on corporate competitiveness.
Almost half of the respondents said that defined benefit plans are being closed to new members or frozen because of competitive pressure.
Respondents to the P&I/Oxford survey were a cross-section of corporate and public pension executives, money managers, trustees of corporate, public and union pension funds, and government regulators, with the majority holding more than 10 years’ experience in the pension industry.