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Human Resource Services
Pensions shake-up?PwC survey of 157 companies following Budget 2009*
June 2009
*connectedthinking
Pensions shake-up?The Chancellor’s Budget 2009 is considered by many to be the final death knell for defined benefits pensions in the UK. In the weeks following the budget, PwC conducted a survey of 157 UK employers, including 65 with over 5,000 UK employees and 33 of the FTSE100. The survey reveals that the cost and risk associated with pensions are still the main drivers for change but that the budget is accelerating change in the UK pensions landscape.
Following the budget, just 4% of companies are planning to make no changes to their workplace pension provision. Companies are looking at the overall role that pensions ought to play in their employment deal. Change is being driven by the need to tackle pension costs and risks, changes in the nature of workforce diversity and individual needs and wants, the need to address auto-enrolment from 2012, and the ongoing need to ensure that employers and their employees are getting value for the money the company is spending on workplace pensions.
But what does change mean? Some employers are losing all motivation to offer workplace pensions beyond the minimum required under auto-enrolment, while others wish (in a relatively high tax environment) to find ways in which they can help their employees build retirement savings for acceptable costs and risks. Companies will increasingly compete by offering employees understandable choice, ease of access, and better value savings vehicles than they can obtain on their own.
PwC believes many larger employers will introduce a broader range of choice for people to receive the delivery of their reward, including for their retirement savings. The attractiveness of different delivery vehicles will depend on the employee’s individual circumstances, including marginal rate of income tax and whether they are a “higher-earner” caught by the new rules that essentially make pensions taxable as a ‘benefit-in-kind’. Expect to see greater use of tax unapproved employer-funded retirement benefits schemes (EFRBS) and employee benefit trusts (EBTs).
Key findings• 96% of participants say that defined benefits pension schemes are becoming increasingly unsustainable for UK employers.
• 77% think the pension tax proposals announced in Budget 2009 will further reduce companies’ motivation to provide defined benefit and defined contribution pensions.
• The main drivers for change are still the need to reduce risk (68%) and cost (64%).
• 88% feel that the public sector has an unfair advantage by being able to continue to offer quality defined benefit schemes.
• Just 4% of companies are planning to make no changes to their workplace pension provision.
The participants• Over 150 participants from major pension schemes including 33 FTSE 100 and 14 FTSE 250 companies
• 65 with more than 5,000 UK employees, with 39 of those employing more than 10,000 UK employees
The future of pensions
www.pwc.co.uk/pensionsThis publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2009 PricewaterhouseCoopers LLP. All rights reserved. ‘PricewaterhouseCoopers’ refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires,
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