Belfast Telegraph

Final salary pensions close at a record rate

Final salary pension schemes closed their doors to existing members at a record rate during 2010, research has indicated.

Around 17% of companies have closed final salary schemes to existing, as well as new, members, up from 7% in 2009 and 3% in 2008, according to the National Association of Pension Funds.

A further 33% of companies are planning to make changes to their scheme, such as cutting the benefits they offer, or moving staff into less generous defined contribution pensions, under which individuals shoulder all the risk.

The group said the research pointed to a "new phase in the decline" of the schemes after a wave of companies closed the pensions to new members of staff as they became increasingly expensive to offer in the face of rising life expectancy and volatile investment returns.

Only 21% of final salary pension schemes are still open to new joiners, compared with 88% 10 years ago.

Joanne Segars, chief executive of the NAPF, said: "The pressures on final salary pensions are relentless and their rate of decline seems to be shifting into a new gear.

"The rate of closures to new staff seems to have levelled off, but now those who are already in a final salary pension increasingly find themselves being locked out.

"The results from this survey show there is no time to waste in developing solutions that will support schemes, their trustees, sponsors and members."

She warned that without action from the Government to help workplace pensions, future generations of pensioners would face a poor and uncertain old age.

The research also found a marked "flight to safety" in the investment choices funds were making, as they moved away from shares and into safer assets such as gilts.

Just over half of companies said when auto-enrolment was introduced from 2012, staff would be put into their existing pension scheme and their current contribution rates would be maintained.

But 9% of firms questioned said they planned to reduce their contribution levels in line with the minimum of 4% from workers, 3% from employers, with the Government topping this up with 1%.

The research comes the day after the Government announced plans to overhaul the state pension to ensure that everyone is better off saving for their retirement.

It plans to replace the current basic state pension and the means-tested top-ups, such as the pension credit, with a single flat-rate pension.

21%

Of final salary pension schemes are still open to new joiners

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