26 August 2008
Due to increased life expectancy employers are hastening to
close final-salary schemes to new members in an effort to limit
costs.
According to research by Aon Consutling a record low of 17%
final salary schemes are still open to new applicants. This is down
from 28% last year. Only 5 years ago half of such schemes were
still open to new employees.
The results are similar those of a biennial review carried out
by Watson Wyatt that concentrated on 134 large private sector
schemes.
Companies are moving away these schemes as they offer guaranteed
pensions regardless of investment or mortality conditoins.
Therefore a significant open ended liability is taken on by
employers.
In the year to April 2007, about 40% of calls to The Pension
Advisory Service concerned final salary schemes. This following
year the figure was 31%.
Tony Attubato, technical manager at TPAS, said: "The biggest
problem that employers face is that these schemes are very
expensive to run. The biggest driving factor is that people are
living longer. There is also more regulation in the post-Robert
Maxwell world. Employers don't want to commit themselves to a level
of benefits that has an unknown cost."
A third of employers who continue to offer final-salary schemes
to new entrants said that closing the schemes was difficult to
contemplate. There have been many high profile strikes recently due
to concerns over pension provision. Aside from falls in
productivity and the effect on employee/ employer relations the
strikes were accompanies by negative press coverage.
Richard Lambert, Director-General of the CBI, said: "Pension
deficits are back near the top of the corporate worry list."
