Will Final salary pensions exist much longer?

Will Final salary pensions exist much longer?

Will Final salary pensions exist much longer?

Most companies have already closed the costly schemes to new members and today's figures suggested 94 per cent plan to either close them altogether or reduce benefits that existing members can accrue.

The rising cost of the generous schemes, which are based on a worker's final salary, means companies can no longer afford to guarantee to pay out what they promised.

Many companies are switching to cheaper defined contribution schemes, which rely on the performance of the stock market instead.

The number of companies that have closed their defined benefit pension schemes to existing members has more than doubled during the past year, from 14 per cent to 32 per cent, and a further 30 per cent of employers intend to close their schemes to existing staff, according to the survey of almost 180 companies, carried out by accountants PricewaterhouseCoopers.

Just 6 per cent of companies said they intended to maintain their defined benefit pension in its current form.

Marc Hommel, pension's partner at PricewaterhouseCoopers, said: "Employers are sounding a repetitive death knell for defined benefit pensions.

"Numerous factors, including the size and volatility of funding costs, and also concerns about the inequality of pensions provision within an employer's workforce, are accelerating their demise."

Companies are actively encouraging former employees to transfer their pension liabilities elsewhere.

Just over half of companies said they planned to offer enhanced transfer values to workers who had money in their defined benefit pension scheme who had since left the company, up from just 8 per cent who did so last year.

The survey also found that 87 per cent of companies think their staff are not saving enough for retirement and 60 per cent think people will not be able to retire when they want to due to insufficient savings.

Seven out of 10 also think plans to reduce the amount of pensions tax relief high earners receive will lead to lower pension provision for all people.

For bespoke pension advice contact Credencis.

We are situated neat to Derby, Leicester, and Nottingham.

Credencis

"Live for today, Invest for tomorrow"

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