Medium-sized companies remain committed to providing pensions for employees but are frustrated by regulatory framework, finds KPMG survey

Despite the closure of a number of defined benefit pension schemes among some of the UK's largest corporations, smaller, medium-sized companies remain committed to employee- sponsored retirement packages, according to a survey by KPMG in the UK.

 

- Over half remain committed to employee sponsored pension schemes

- But the regulatory framework has made schemes more difficult to manage

- While defined benefit schemes still persist among the UK's medium-sized companies, there is a risk that they are approaching a tipping point

Over half (54 per cent) of the 205 based companies with turnovers of between £5 million and £500 million questioned in KPMG's "National Business Confidence” survey said that they agreed that encouraging and contributing towards pensions should be the responsibility of the employer.

But among those businesses agreeing that employers have a responsibility for pension provision, there was a strong bias towards defined contribution type schemes with 70 per cent saying they thought these types of schemes were more appropriate than defined benefit schemes (supported by 21 percent).

Defined benefit schemes under pressure

The survey suggested that while defined benefit schemes were still quite prevalent among these companies, they were under quite significant pressure.

Almost four in ten (38 percent) of the sample said they still had a defined benefit scheme in place, regardless of whether it was closed.

And of these, 40 percent remained open to new employees, in contrast to the position observed among larger businesses.

However, the survey suggests that the regulatory framework is having a negative impact on defined benefit pensions.  Just 12 percent of those respondents who still had a defined benefit scheme said that the scheme funding regulations and the pensions regulator had made it easier to manage their scheme.  Nearly half (49 percent) said they had made it more difficult and a large proportion (40 percent) said they did not know.

Linda Bell, pensions director at KPMG in the UK, said:  "It's encouraging to see that so many medium-sized companies remain committed to employer supported pension provision.  But it's disappointing that those defined benefit schemes that do persist do so in spite of rather than because of the regulatory framework. 

"Many of the UK's very large businesses are already walking away from defined benefit schemes due to the huge costs involved.  It feels like medium-sized companies are reaching a similar tipping point whereby the costs and risks of pension provision are beginning to outweigh the desirable benefit of looking after their employees - at least where defined benefit pension schemes are concerned.  That said, with good advice, there are ways in which businesses can tailor their pension options so they can have an attractive retirement package for employees with manageable costs.”

 

-ENDS-

 

For the purposes of the survey, Opinion Leader Research interviewed senior executives at 205 companies between the 14th and 29th September 2009.


For further press information, please contact:

Margot Cowhig, Corporate Communications Manager, Tax and People Services, KPMG in U.K.
Tel: +44 207 694 4246 / +44 7920 274856
e-mail: margot.cowhig@kpmg.co.uk

About KPMG:

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with 11,500 partners and staff.  The UK firm recorded a turnover of €2.2 billion in the year ended September 2008. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 148 countries and have more than 113,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.