The Death of Final Salary Pensions?
Final Salary employer-provided occupational pensions, (also known as 'defined benefit' pensions) in earlier years, were the pride of the UK pensions landscape.
If you were a member of such a scheme, you had every expectation of looking forward to a financially secure retirement. The scheme would provide you with a pension based on your salary and years of service. Your pension was not reliant upon the performance of the pension fund.
If there was a shortfall in the value of the pension fund, your employer would make it up. However, final salary pensions are now either being wound up, closed to new employees, or no longer providing future final salary benefits to existing employees.
In March 2008, only 31% of all Final Salary occupational pensions were open to all employees.
(Source: The Pensions Regulator)
In June 2010 according to a survey by PricewaterhouseCoopers (PwC), ninety-four per cent of employers plan to reduce or stop their final salary pension scheme.The survey, of 179 leading UK employers, including 34 with more than 10,000 employees and 38 of the FTSE 100 companies, revealed that closures of defined benefits pension schemes are set to increase.
The PwC survey found that:
- Only 6% of companies expect to retain defined benefits pension schemes in their current form
- The number of companies that have shut defined benefit schemes to existing employees has more than doubled since last year’s survey, from 14% to 32%
- A further 30% of employers intend to close defined benefit schemes to existing staff (this figure was just 17% last year)
