More pension schemes to offload liabilities

Around half of private sector final-salary pension schemes expect to offload their liabilities to a specialist provider, according to research released on Thursday by consultancy firm Watson Wyatt.

The survey found companies were focused on the need to manage the cost and risk of their final-salary schemes. Over 40 percent of such schemes expect to stop existing members from accruing future pension benefits over the next five to 10 years, up from only 6 percent which have done so currently.

Others are increasing member contributions or reducing the rate of accrual. But in the face of volatile investment markets, tougher regulation and growing life expectancy, many are looking to offload their pensions burden to firms such as Legal & General, Paternoster or Pension Corporation.

With only 14 percent of final-salary pension schemes likely to remain open to new members in 10 years' time, defined-contribution schemes will become increasingly important, Watson Wyatt said.

Unlike final salary schemes, defined contribution ones offer no guarantee of the level of income a member will receive in retirement, but the survey predicted that contribution rates into them will rise from their current rate of around 15 percent, to allow pensioners a better standard of living.

Watson Wyatt surveyed 134 organisations with combined pension scheme assets of more than 230 billion pounds.