Abstract
The UK workplace pensions industry is currently going through a very challenging transitional period. In the private sector, generous final-salary occupational pensions are quickly becoming a thing of the past as burdensome regulations and the poor economic environment are making them too expensive to run. In their place new and often existing employees are being offered less generous but cheaper to run ‘money purchase' contract based schemes - where most of the risks and responsibility is on them, not the employer.
Key issues in the market
- The recession has accelerated the decline in final salary scheme pension provision in the UK.
- Contract based defined contribution GPP schemes have become more popular but employers continue to scale back their level of contributions.
- An increase in the number of firms going into administration has raised concerns over the strength of the Pension Protection Fund.
The pension buy-out market has heated up during the past year as the effects of the credit crunch have made it cheaper for insurers to acquire company pension liabilities.
- The government has worked to reform the pension system but frequent legislative changes are raising concerns over too much government manipulation.
- Increased longevity will put a greater strain on retirement income which may force many retirees to work after reaching retirement age.
- Personal Accounts are due to launch in 2012 and should increase pension participation in the UK but could create problems for private suppliers of workplace pensions.
- Consumer research for this report has indicated a relatively apathetic attitude towards workplace based pension schemes - especially among the younger sections of the population.
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