There has been a "seismic collapse" of private sector pensions and fresh incentives are needed to boost retirement savings as auto-enrolment nears, a report warned today.
Bold government action to reinvigorate workplace pensions is being called for by the Association of Consulting Actuaries (ACA), which argues there is a growing gulf between those in the private and public sector.
- Private sector pensions seen 'seismic collapse'
- New incentives to boost pension savings needed
- Growing gulf between private and public sector pension provision
Nine out of 10 private sector defined benefit schemes have been shut to new entrants and four out of 10 are closed to future accrual, according to its study entitled Workplace Pensions: Challenging Times.
Just over a quarter of employers (26%) have budgeted for the cost of workplace pension auto-enrolment, which is being phased in from October, the report found.
It tracked a growing trend among private sector employers of all sizes to review existing arrangements and for many, in the tough economic climate, to find ways to cut pension costs.
Around three-quarters of employers say they are likely to auto-enrol all employees into their existing workplace pension scheme but 27% are likely to review their existing pension benefits to offset the cost of higher scheme membership.
Overall, a fifth of employers are looking to decrease their pension spend, balanced by 14% aiming to increase spend, the survey found.
The survey took responses from 468 employers, running over 560 pension schemes with combined assets topping £114 billion.
At present, some nine out of 10 employers say their employees retire at age 65 or younger.
But in under a decade, close to four out of 10 expect the typical retirement age to be 67 or later, and one in six employers expects the typical retirement age to move out to between 68 and 70 by 2020.
ACA chairman Stuart Southall says: "Auto-enrolment, beginning in late 2012, should widen private sector pension coverage, particularly where no pensions are offered at present, but the fact that recently the Government had to delay its introduction for smaller employers, because of the deteriorating economic climate, is discouraging."
"Inevitably, any fresh initiative to boost pension savings will require both an easing in regulatory controls and, in all probability, new incentives to encourage employers and employees to take up the challenge and opportunities.
"The Government needs to be bold in helping private sector employers so they can consider new ways to boost pension savings over the mid to longer-term so public sector pensions are not far better."
Around eight out of 10 private sector employers supported recommendations that public service pensions should be scaled back and that member contributions should increase, while nine out of 10 agreed that the pension age in such schemes should increase to the State Pension Age, the ACA says.
A Department for Work and Pensions spokeswoman says: "Automatic enrolment is the most radical action taken by any Government to help address the question of saving for retirement.
"It will enable millions of people to save, many for the first time.
"We will continue to work with industry as we bring this forward as it is in everyone's interest to help people save for their retirement."