Final salary pension scheme closures accelerate
20 November 2003
The number of firms closing their final salary pension schemes to new staff has doubled since 2001, new figures reveal.
A survey of 464 firms conducted by the National Association of Pension Funds (NAPF) found that one in four had closed their schemes to new staff in 2003.
NAPF claims that firms contribute an average of 16 per cent of the employees' salary to final salary schemes compared to just six per cent to money purchase schemes.
The closure of such schemes marks the end of a guaranteed retirement income for millions of workers and increases concern about the recent decline in pension savings. Nearly three-quarters of companies said they had moved to defined contribution schemes, in which they only guarantee how much they will pay into a scheme and not what it will be worth when a worker retires.
Firms have found that the current economic slump, complex red tape governing schemes and increased life expectancy have all added to the cost of providing pensions.
However, the research also found that for every employer that closed a final salary scheme two more increased the amount they paid into it in order to keep it open.
Altogther 53 per cent of employers increased their contribution levels during the year, compared with only seven per cent in the previous 12 months.
NAPF chief executive, Christine Farnish, commented: "This survey highlights the significant growth in cost to firms continuing to provide decent occupational pension schemes.
"What is perhaps surprising and welcoming is that so many employers remain committed to pensions."
However, she warned: "The most worrying feature of this shift is the significantly lower amounts of money going into money purchase schemes. This is storing up big problems for the future."