By Charlotte
Beugge
A yawning
gap has developed between employees in the private and public sector, according
to a survey by the Association of Consulting Actuaries.
While more
than five million public sector employees enjoy "open" defined
benefit pension schemes, fewer than two million private sector employees are
now in largely "closed" schemes.
Defined
benefit schemes are also known as final or average salary schemes and are the
"gold standard" of pensions for employees as the risk is on the
employer rather than the employee.
With money
purchase or defined contribution schemes the employee saves in a scheme
investing mainly in the stock market and uses that to provide an income for
their retirement - so the risk is on them rather than the employer.
The survey
found that nine out of ten private sector defined benefit schemes are now
closed to new entrants and four out of ten closed to future accrual - meaning
those already in the schemes can't accrue more years toward their pensions -
with half of these closing in the last year alone.
A similar
number have switched from using the retail prices index to uprate benefits to
the consumer prices index and 10% have amended early retirement terms, reduced
accrual rates or increased retirement ages.
The survey
also found that a quarter of private sector employers are now looking to
buy-out (or buy-in) all their defined benefit scheme liabilities in the next
five years, rising to 40% within a decade.
