More than half the companies that have reviewed their final salary pensions in the past five years have closed schemes to new entrants, according to a new report.

The pace of change has quickened

Colin Singer, Watson Wyatt

Consultants Watson Wyatt found that 55% of companies it surveyed had undertaken a major review over the last five years.

Of these, 56% had stopped offering final salary schemes to new workers.

In two-thirds of cases employers introduced cheaper defined contribution plans, which do not guarantee the level of a final pension.

In a similar survey by Watson Wyatt conducted in 2000, only a quarter of final salary schemes were substantially amended.

Pace of closures

There is growing concern about the rate of final salary pension closures - and how people will fund their retirements.

Final salary schemes are traditionally seen as more generous than defined contribution or money purchase schemes, which are affected by falling stock markets.

According to Watson Wyatt's survey only one third of companies decided against changing their schemes significantly.

Only 7% of companies that had reviewed their pension scheme had decided to keep a final salary promise for all staff, but with reduced benefits.

When company schemes were reviewed almost two-thirds were replaced with defined contribution plans.

One in five companies introduced stakeholder plans, 15% were group personal pensions and 3% were schemes based on average career earnings.

"The main drivers for change are cost-related with around 80% of organisations citing cost issues," said Colin Singer, a partner at Watson Wyatt.

"And the pace of change has quickened."