Final Salary Pension schemes are closing rapidly according to new figures.
The research from accountants Price Waterhouse Coopers has revealed that nine out of ten firms plan to close these schemes to workers still paying into them.
Plans to phase out the final salary pension system have been underway for several years with most companies closing the schemes to new workers.
But now it looks as though existing members enrolled on a final salary system could face having their pensions moved to a less lucrative, but cheaper, scheme.
PwC’s research showed that employers running the schemes pay an average of 23 per cent of an employee's salary into their pot, compared to just 6 or 7 per cent on alternative schemes.
Marc Hommel, pensions partner, 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 recognise the value to their businesses and people of providing workplace pensions but not at the risk of jeopardising the business as a whole.”
The report also found that a third of companies stopped existing members from paying into them last year, up from just 14 per cent a year earlier and only 6 per cent said they intended to maintain their final salary scheme in its current form.
Nearly two thirds of employers also said that their staff are not saving enough for retirement and 60 per cent think that their employees will not be able to retire when they wish due to insufficient savings.
“While employers cannot shoulder all the burden of responsibility for an ageing population with insufficient retirement savings, they will undoubtedly be impacted by these forthcoming socio-economic problems. Those employers that can facilitate retirement saving in an easy, understandable and flexible way will be best placed to ride these longer term challenges.”
© Fair Investment Company Ltd