Closure of defined benefit (DB) pension schemes is not the only option available to companies caught in the grasp of the credit crunch, says Hewitt Associates.

In its survey of leading DB pension schemes, the global consulting and outsourcing company has found that the other options are currently bweing actively considered, or are already implemented by the 50 surveyed clients.

Increasing member contributions, changing accrual rates, hybrid arrangements and capping pensionable pay rises are other options considered or implemented by companies in the throes of the current financial crisis, in addition to the closure to DB future accrual.

"We all know that in this economic climate companies are under pressure to reduce expenditure," commented Kevin Wesbroom, UK lead global risk services at Hewitt. "Faced with the potential alternatives of reducing headcount or pay cuts, a reduction in pension benefits may be one of the least unpalatable options. However, the Hewitt survey has demonstrated that while scheme closure is undoubtedly one of the options under deliberation, there is also a range of alternative strategies which may help reduce pension pressure and which are being actively considered."

Wesbroom added that employers and trustees must work through the full range of options for dealing with the current deficits, and not risk leaving their employees poorly prepared for retirement. "Support from the Government to help these alternative approaches may help us to avoid a rapid decline in the coverage of high quality pensions - and also the inevitable social consequences which would follow."

- Pensions Age January 2009

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