Most defined benefit pensions short funds

EIGHTY PER cent of defined benefit pension schemes still do not meet the required funding standard despite help from a stock market rally in the second half of 2009, according to a study by benefits consultant Mercer.

Almost half of defined benefit schemes expect to adjust the level of benefits provided or the contributions of employees, or both.

The Mercer study, published yesterday at the company’s annual defined benefit conference, says that as many as 15 per cent of remaining schemes may be forced to wind up as a result of funding difficulties. Five per cent of funds – excluding those affected by their sponsoring employers going out of business – have already taken this course, Mercer said.

It called for more time for the 40 per cent of schemes who are required to submit recovery plans to the regulator, the Pensions Board, by June 30th next.

“Several aspects of the National Pensions Framework, announced last week, such as the increase in State retirement age, a change in the tax treatment of employee contributions and the outline for a new type of pension scheme could all have a significant impact on funding plans,” Mercer said.

Addressing employers and pension scheme trustees yesterday, Mercer’s Joyce Brennan said they needed to take a “cool hard look at whether you can realistically continue to afford the costs and risks of current defined benefit pension plans”.