UK - Four-fifths of UK pension funds want to see the government issue more long-dated and index-linked gilts as a way of guaranteeing returns. This follows a year where the number of defined benefit (DB) schemes remaining open to new members fell to an all-time low.

The results, from the National Association of Pension Funds (NAPF) 2009 Annual Survey, reveal the recent economic downturn has taken its toll on pension schemes in the UK, with only 38% saying their fund would remain open to new members for the next five years.

Additionally, just under a third of already closed schemes plan to switch their existing members to defined contribution (DC) schemes. And 37% of open private sector schemes state they will enrol new members in DC schemes. 

Of the 300 NAPF members responding, more than half saw a need to introduce auto-enrolment into the upcoming Personal Accounts system once it launches in 2012 although 17% admitted they will have to increase employer contributions to reach the minimum legal threshold.

Joanne Segars, chief executive of the NAPF, also called on the government to "take bold and positive action" in support of employer-sponsored pensions, saying Alistair Darling, Chancellor of the Exchequer, had "a golden opportunity to make a difference" in the Pre-Budget Report on 9 December.

Of the proposal to issue more long-dated and index-linked gilts, supported by 82% of respondents, Segars said: "This single measure would benefit pension funds by helping to reduce deficits and support corporate scheme sponsors by reducing the scale of pension fund liabilities on their balance sheets."

The ongoing financial market upheaval has also taken its toll on many pension funds, with only 44% of assets invested in equities, down seven percentage points from last year. Property investments have also reduced significantly in line with the downturn in the sector, with almost 45% less invested in real estate. It fell from 7% of all assets in 2008 to 3.9% this year.

Other findings showed the costs of running a scheme have risen, although they still remain below 4.4% of total asset value. Additionally, over half of all funds now use or are in the process of hiring independent trustees.

Respondents also called for the government to become the ultimate guarantor for the Pension Protection Fund (PPF), with 69% in favour, while 79% wanted more control over scheme rules, including the ability to determine the scheme's retirement age.

Topics