UK actuaries are urging employers to consider alternative pension scheme designs that allow employees and employers to share the investment risks in final salary company pensions schemes. This comes in the wake of increasing coverage about funding levels and calls from the TUC for pensions to be made compulsory.

Many employers are switching to defined contribution schemes to help control their costs. But these changes shift all the risks to employees and are often accompanied by a cut in contribution levels. Many employees are only now beginning to grasp the implications for their pensions and that the investment risk lies with them.

The consequences for the public of the recent high profile closures of final salary company pensions schemes and alternative designs for schemes were put under the spotlight at last week's Pensions Convention of the Institute and Faculty of Actuaries.

Addressing delegates at the Convention, actuary Aaron Punwani said: "With a clear understanding of employers' objectives, actuaries can design tailored pension schemes that provide a better match for the needs of employers, whilst also addressing the concerns of employees."

A company may be prepared to bear some or all of the investment risk up to retirement, but pass the risk to employees at retirement. This can be done by expressing the benefit as a defined lump sum, rather than a defined pension, at retirement. Part of the lump sum can be taken as tax free cash, and the rest used to buy a pensions on the open market.

Punwani concluded: "This approach helps bridge the gap between one party or the other shouldering all the risks. Provided the arrangement is communicated clearly, the result may be a fairer way for people to plan for their retirement with more confidence".

Punwani also emphasised that, increasingly, saving for retirement not only means saving through a pension but also covers other options like ISAs and property investment.