Quarter of firms poised to scrap final salary pensions
A quarter of British companies offering generous final salary pensions to their workers plan to scrap them within five years, according to a new survey.
The poll by the National Association of Pension Funds comes in the wake of the Co-operative group announcing it plans to scrap its scheme and retailer Arcadia telling its workers they must work another five years to get theirs.
The survey has also revealed the extent to which final salary schemes have disappeared since the start of the millennium.
The proportion of private sector final salary, or defined benefit, schemes, whether open or closed to new members, had fallen from 78 per cent in 1999 to 49 per cent last year.
Thirty seven organisations reported having closed their final salary scheme to new members within the past 12 months, an almost identical figure on last year's survey.
Just 43 per cent of private sector final salary schemes were still open to new members, and 70 per cent of closed defined benefit schemes had closed within the past two years.
A total of 80 of the organisations polled Ė a quarter Ė said they expected to close their final salary scheme either just to new entrants or completely within the next five years, said NAPF.
NAPF chief executive Christine Farnish said: "The survey reinforces NAPF's belief that retirement provision through the workplace must be at the heart of the UK's strategy for addressing the ageing population, but that improved incentives (as well as the removal of disincentives) are needed if the recent decline in occupational pensions is not to continue.
"While it is right that attention focuses on how we can secure adequate retirement incomes for future generations, companies must also manage the cost of pension promises that have already been made," she added.
Yet more evidence of the scale of the financial challenge facing UK companies has also emerged with the publication of figures suggesting the pensions' shortfall being faced by the top UK companies could be as much as £150m, three times what was previously thought.
The research by the Pensions Board, which advises the government on behalf of the actuarial industry, warned that FTSE-100 companies had significantly underestimated the costs of "buying out" their pensions liabilities.
This in turn has come on the back on figures published last week by consultancy Mercer suggesting the total pension deficit for FTSE-350 companies increased from £75bn to £93bn between 2004 and 2005.