A shift towards collective defined contribution (CDC) schemes is "unlikely" as the trend towards defined contribution (DC) plans continues, LCP says.
The consultant's Accounting for Pensions report, published today, found that, during 2013, GKN closed its hybrid pension scheme to new recruits - leaving only four FTSE100 companies - Diageo, Johnson Matthey, Morrisons and Tesco - providing any form of DB pension provision to new employees.
In addition, four more FTSE100 companies - BG Group, InterContinental Hotels Group, Sainsbury's and Wolseley - closed their DB pension schemes to future benefit accrual. A further three companies, including HSBC, Weir Group and Severn Trent, have reached agreement to do the same in the near future.
At the same time, companies are making changes that reduce the employer cost of their remaining DB pensions. Lloyds Banking Group previously limited increases in pensionable pay to 2% per annum in 2010, but has now decided to freeze increases to pensionable pay completely from April 2014 - a move LCP estimates will result in a £1bn gain being disclosed in its December 2014 accounts.
In addition to this, Johnson Matthey has increased employee contributions for those who remain in its CARE scheme; National Grid has capped increases in pensionable salary to the lower of RPI inflation and 3% per annum; and Royal Mail reached agreement to increase accrued pensions in line with RPI inflation (up to a maximum 5%) rather than in line with salaries, a move that resulted in a £1.35bn gain, taking the IAS19 funding level of its pension scheme to 183% at 31 March 2014.
However, while membership of FTSE100 schemes has been declining, LCP says membership of DC pension schemes has been increasing rapidly - with Scottish & Southern Energy reporting an employee participation rate in its DC scheme of over 90% and Travis Perkins saying that only 2% of its employees have opted out of its pension arrangements.
Jonathan Stapleton analyses the full LCP report in the latest issue of PP (PP Online 6 August)