UK – Trustees have mostly opted for index-tracking mandates for defined contribution (DC) default options, according to the latest National Association of Pension Funds (NAPF) annual survey.

The association noted that, as auto-enrolment began in earnest, a greater number of respondents began to disclose the investment strategy underlying their default investment options – at the same time as figures showed the growing need for DC funds, as fewer than one in six defined benefit (DB) schemes remained open to new entrants.

The survey said that while the most common default fund used was a passive tracker mandate, multi-asset funds and diversified growth funds were also popular choices.

"The default funds picked up in the survey tend to be very heavily invested in equities during the growth phase, shifting almost entirely into fixed income and cash as the member reaches retirement," the survey said.

However, the NAPF was keen to highlight the pressures facing DB funds, noting that 31% of the schemes were now closed to new accrual, an 8 percentage point increase year on year.

Joanne Segars, the organisation's chief executive, said the "pressures" facing DB funds had likely proven too heavy a burden for companies.

"The growing liabilities fuelled by quantitative easing will have been a factor behind the record hike in closures," she said.

However, she stressed that DB funds were "far from finished".

"It is essential the government show them more support in managing some extremely testing economic circumstances," she said.

Alan Collins, head of corporate advisory services at Spence & Partners, said the "clear message" was that companies were shying away from the risks posed by DB funds.

"Employers are rightly not prepared to see their future viability put at risk by continuing these schemes," he said.

"It is worth remembering that private sector employers do not have the luxury of moving the goalposts on past promises in the same way that the government has done by increasing the state pension age and reducing future pension increases."

Malcolm McLean of consultancy Barnett Waddingham meanwhile said the further closures marked a "slippery slope to oblivion".

"This will undoubtedly be compounded by the loss of National Insurance rebates following the end of contracting-out in 2017," he added, a result of the government's proposals to introduce a single-tier state pension in four years.

He also highlighted the need for defined ambition to be taken more seriously.

"The probability of further private sector closures also emphasises the need for a new middle ground between defined benefit and defined contribution and for the government to bring forward legislation to permit greater risk-sharing models of the defined ambition variety," he said.

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