The trend for closing generous final salary schemes to existing members will become more common practice for companies looking to cut their costs amid the recession, according to a report by consultants Watson Wyatt.
It said half of Britain’s companies will close the schemes to existing members, while another 28 per cent will keep their scheme open to existing members but on less generous terms.
While three-quarters of companies have already closed such schemes to new staff, just a small number have been closed to existing members so far. The report suggested the figure could be as low as 9 per cent, but warned numbers would accelerate significantly by 2012.
When a scheme closes, members can no longer contribute and should pay into another scheme, resulting in the company saving money. Rising life expectancies mean companies consider the defined benefit schemes, including final salary pensions, too expensive.
Rash Bhabra, head of corporate consulting at Watson Wyatt, said: “More and more employers are taking a long, hard look at the risks they run through their pension schemes and saying enough is enough.
“Companies who were delaying a decision on closing their schemes to existing members until others had stuck their heads above the parapet are now ready to act. There is a sense of inevitability that what was once seen as the nuclear option is starting to become the norm.”