(August 14, 2012) — Amid a dire fate among the defined benefit (DB) market, closures of such plans in the United Kingdom are actually slowing, according to a survey by Greenwich Associates.
A total of 12% of all those surveyed anticipate closure to future accruals within the next two to three years. In comparison, 15% of those surveyed two years ago said they expected closure.
Meanwhile, Greenwich’s 2012 UK Investment Management Study of 353 senior professionals at a range of institutional funds — conducted from January through March — found that the life of the average DB plan is about 35 years.
The study discovered that among corporate plan respondents, 24% said they’re likely to up their exposure to active fixed-income strategies. At the same time, 14% said they plan to heighten their allocation to passive fixed-income.
The study by Greenwich Associates follows a study by consulting firm Aon Hewitt last November, confirming a continued trend of closure to DB accrual among UK schemes. “Just over 40% of the schemes surveyed have either already closed to DB accrual or are currently in the process of closing to future accrual,” James Patten, benefits design specialist at Aon Hewitt, said in a statement at the time. “Nearly half of those that have closed to accrual, and indeed many of those that have not, are now taking pension risk management to the next phase. In some cases, this might simply be through implementing a liability management exercise such as an enhanced transfer value offer.”
Patten continued: “However, in an increasingly uncertain economic environment, we are seeing more schemes trying to take this concept a stage further. A growing minority is considering, or indeed implementing, ‘flight plan’ strategies to chart a course for reducing pension risk exposure at appropriate times, and/or ultimately fully settling their liabilities with an insurance company.”