Half of final salary pensions to disappear in five years

Nov 14 2006 by Nic Paton Print This Article

Another nail has been hammered into the coffin of Britain's occupational pensions provision with the news that almost half the remaining final-salary company pension schemes could disappear in the next five years.

Research by financial services company Alexander Forbes said the soaring cost of meeting the latest legal requirements could be to blame for the rise in expected closures.

Its survey suggested that six out of 10 final-salary pension schemes had seen their costs rise as a result of new legal demands.

Of these, 15 per cent had seen costs rise by more than 10 per cent, and 4 per cent of schemes had seen their costs rocket by more than 30 per cent.

Despite continuing deficits, most employers had failed to increase employer or employee contributions to their scheme in the past 12 months, the survey also found.

Fifty nine per cent had not made any increases, but of those schemes that had raised contributions, 42 per cent had increased employers contributions by more than five per cent.

Robert Macgregor, corporate development director said: "Employers have seen their costs soar – with some seeing their costs rise by an alarming 30 per cent just to comply with the terms of the Pensions Act 2004."

"It's quite clear from the survey that businesses are struggling with their defined benefit pensions," he added.

"A very high proportion of employers expect to end all DB pension provision within the next five years – building on the already strong trend to switch from DB to defined contribution," he concluded.