The current £27bn UK savings gap will jump by £5bn a year as more employers shift from defined-benefit to defined-contribution pension schemes, claims the ABI.
Speaking at last week's Sofa conference, ABI head of pensions Joanne Segers warned that based on data from the NAPF's latest annual survey, 13 companies switched from final-salary/DB schemes to money-purchase/DC schemes over the past year compared with only six switching in 2000.
Forty-six companies had closed their final-salary sch-emes to new members in 2001 compared with 18 in the previous year, which will also exacerbate the savings gap. Segers expects this trend to continue.
Lower employer contributions that come with DC sch-emes and the absence of a guaranteed level of pension at the end will see the gap widen by £5bn a year.
Segers says as employers keep existing employees in DB schemes and put new joiners into DC schemes, the balance is continually shifting and the gap will steadily increase.
To tackle this trend, she emphasises the need for advice, calls for an examination of how employers contribute to sch-emes and encourages the ind-ustry and the Government to work together to narrow the gap.
Segers said: “We have looked at the NAPF survey and our estimate is that the shift from DB to DC will add £5bn to the savings gap. I suspect a further move from DB as the pressures on employers show no sign of changing.”