Defined contribution schemes, where the employee builds up a pension pot via investments, are the typical replacement for a company's final-salary scheme.
Employers put an average of 15.8% of salary into their staff's final-salary schemes, but contribute just 6.2% of salaries to defined contribution schemes.
Final salary schemes, which guarantee a pension equivalent to a fixed proportion of workers' final wages, provide a more generous retirement income than defined contribution schemes, which are tied to stock market performance.
Typically staff have been forced to contribute to less generous career-average or defined-contribution schemes.
Defined-benefit pension funds are anyway being consigned to the dustbin, in favour of defined-contribution schemes.
Meanwhile, many employees in the private sector have been switched into defined-contribution schemes, where their retirement income is dependent on investment performance.
Instead, new employees join defined-contribution schemes, which are much less generously funded.
The rising burden of defined-benefit schemes is forcing some firms to restrict them to existing staff and to put new recruits into new, defined-contribution schemes, thereby transferring to the employee the risk of low investment returns in the future.
Final-salary schemes were closed to new members, who were switched into defined contribution (DC) schemes, in which employees bear the investment risk.
Because the cost of such schemes is high, new employees are usually offered defined-contribution (DC) schemes, in which employer contributions are lower and retirement income varies with the markets.
They are replacing them with defined-contribution plans, savings schemes into which employees and employers put regular contributions.
Many companies have abandoned final-salary or defined-benefit (DB) pensions for new staff and switched to defined-contribution (DC) schemes, in large part because of the high cost of the former.
That approach will be hopelessly inadequate for those who want to build a decent pension, especially in defined-contribution, or money-purchase, schemes, where the employee bears all the investment risk.
Companies have also, sensibly, been switching from defined-benefit schemes, under which the company bears the risk of maintaining pension payments, to defined-contribution plans, in which the risk lies with individual pensioners.
Most defined-benefit schemes have either a set retirement age or a mandatory number of contribution years before a full pension can be drawn.
It thinks that nearly half of employers whose schemes are still open to new joiners will close them, with a defined-contribution (DC) scheme being offered to the staff instead.
The standard response of companies to the pension crisis of recent years has been to close their schemes to new members, plug the deficits from profits and set up less generous defined-contribution plans for new staff.
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