Many of Britain's bosses are continuing to fund their own lucrative final salary pensions schemes while forcing their closure for other staff, a new survey ahs found.
Research by financial adviser Origen has found that while the past four years has seen a dramatic fall in the number of firms keeping final salary schemes open for new staff, there has been a fall of just five per cent in the number of such schemes open to senior executives.
Just under half of senior executives in Britain's large companies still enjoy final salary schemes, the research found.
In contrast, two-thirds of firms have closed their final salary schemes (also known as defined benefit schemes) to the rest of their employees and replaced them with riskier money purchase (defined contribution) plans which have no guarantees as to their worth on retirement.
The survey also found that employers were paying an average of seven per cent of staff's pay into these defined contribution schemes, only half what they pay into final salary schemes.
This dramatic reduction in employers' contributions is likely to have a devastating effect on retirement incomes, Origen said, providing a pension worth only some 15 per cent of an employees pre-retirement earnings if they had joined a scheme aged 40 and retired at 65.
Meanwhile, the proportion of employees not paying into a company pension scheme has also increased to more than a third (34 per cent) this year compared to 29 per cent in 2005.
And the situation could get even worse. According to Origen's Michelle Cracknell, government proposals to compel employers to make pension contributions for all their staff could backfire.
Many employers who currently pay more than the statutory three per cent demanded under the National Pensions Saving Scheme (NPSS) might be tempted to cut back their contributions to the statutory minimum, she warned.
"Employers face an increase in overall cost because of auto-enrolment and hence adopting the NPSS contribution levels may help them to balance their budget. After the small increase in contributions to defined contributions pensions, it will be a shame if these are reduced," she said.
