Final salary pension schemes continue to close

Final salary pension schemes continue to close
Published:  3 Jun at 9 AM
A new survey indicates that if Britain’s largest firms continue to shut down final salary pension schemes at the current rate defined benefit pensions could become extinct within a decade. The study, carried out by consultants Towers Watson, found 34 per cent of FTSE 100 firms already offered no final salary scheme to employees.

Providing retirement incomes to staff has become increasingly expensive as people live for longer and increased pressure is put on gilt yields. The cost of running pension schemes is likely to become even more expensive after2016 when the government introduces new National Insurance rules.

Many companies are already struggling with widening pension deficits. Pensions Minister Steve Webb said action taken over the next year will be critical.

Less expensive defined contribution pension schemes have been introduced by many companies as they close their final salary schemes to current members as well as new employees.

Will Aitkin from Towers Watson said closing schemes to current members was quickly becoming the norm and if the trend continues then all final salary schemes at the country’s largest companies could be shut over the next 10 years. In October last year the government introduced its auto enrolment pension scheme. According to the research 90 per cent of employers placed into workplace pension schemes have chosen to remain rather than opt out.