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The fallout of the financial crisis is forcing an increasing number of UK companies to close their expensive defined benefit pension schemes in favour of cheaper pension arrangements, new research has found.
Half of UK companies expect to have closed their defined benefit (DB) schemes which pledge a level of pension linked to their salary to all employees by 2012, a survey by pension consultants Watson Wyatt showed on Monday.
"More and more employers are taking a long, hard look at the risks they run through their pension schemes and saying "enough is enough"" said Rash Bhabra, head of corporate consulting at Watson Wyatt.
"What was once seen as the nuclear option is starting to become the norm" he added.
More than one million employees currently in DB schemes may have to rely on defined contribution or DC schemes, where they have to deal with the significant investment and mortality risks that employers used to bear, Watson Wyatt said.
Falling equity markets, increasing longevity and new regulation have accelerated the trend of UK companies closing their expensive DB schemes in favour of cheaper DC schemes.
Recently, IBM said it planned to close its final salary pension in the UK. Oil major BP has also said it would close its final salary scheme for new UK employees joining the company after April 2010, while Barclays said it would freeze its final salary pension scheme for British staff.
Watson Wyatt said its findings are based on more than 250 survey responses, which include many of the UK's largest employers.