Over half of defined benefit (DB) pension schemes currently open to new members are in danger of closing as a result of the current financial crisis, says the National Association of Pension Funds (NAPF).

In its latest survey, Pension Provision and The Economic Crisis, the NAPF found that 52 per cent, the equivalent of 1,000, of the currently open DB pension schemes are likely to close. In the last five months, the likelihood of changes being made to the schemes has increased significantly.

However, worker's confidence in pensions has also dissolved over the year with the NAPF's Pensions Confidence Index currently standing at one per cent, compared with 22 per cent in September 2008.

NAPF draws up Action Plan to salvage DB pensionsAs a result of the survey findings, the NAPF is urging the Government to take radical action and apply the same approach to pensions as it has to other sectors such as banking and small business.

The NAPF has released an Action Plan, which calls for measures to enhance scheme member security, by making the Government the ultimate guarantor of the Pension Protection Fund (PPF), and to build member confidence by releasing joint Government and industry information campaign on the importance of pension saving.

Reducing costs and improving scheme efficiencies, easing the pressure on scheme sponsors through greater issuance of long-dated gilts by the Government, allowing greater flexibility in setting scheme rules with regards to retirement ages and indexation, and helping scheme manage their deficits by allowing longer periods for them to make good funding shortfalls are also suggestions on the Action Plan.

"These exceptional times call for exceptional measures and new thinking," commented Joanne Segars, chief executive at the NAPF. "We have seen bold action from the Government in response to the crisis in other key areas and similar action is now needed for the UK's pension schemes.

"With so many schemes set to close to new members and employee confidence in pensions evaporating, this is now or never moment if we want to see defined benefit schemes remain a key part of the UK's pension landscape."

- Pensions Age January 2009

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