The exposure of defined-contribution pension savings to market volatility is prompting companies to introduce hybrid plans with some guarantees attached, according to research commissioned by the UK Department for Work and Pensions.

A report by Hewitt, an investment consultant, said defined-contribution pensions could be hit if retirement ages coincided with poor market conditions. As a result, some companies are reluctant to pass on investment risks to employees and offer pensions based on average salaries or other arrangements, including cash balance, which offer performance guarantees, said Hewitt.