Final salary pension becoming extinct

Final salary pension becoming extinct.

Final salary pension becoming extinct

A survey has shown that all FTSE 100 companies’ final salary pension schemes could be shut within a decade, after more than a quarter of companies have already shut their final salary pension schemes to all their workers.

The number of employees without a final salary pension has increased to 34%, as 27% of the UK’s largest companies have closed schemes to both new and existing members.

In recent weeks, companies including Axa and DHL have been among those announcing plans to close final salary schemes to existing members, having already introduced less costly defined contribution schemes for new employees.

Final salary, also known as defined benefit, schemes are under pressure after a combination of increased life expectancy and low gilt yields have made it increasingly expensive to provide the retirement incomes promised.

Many company pension schemes already have large deficits and changes in the rules around national insurance contributions, set to come in when the flat-rate state pension is introduced in 2016, will add to the cost of running a company pension scheme – according to experts.

Some also warned that larger than expected deficits and the loss of national insurance rebates from 2016 may lead even more employers to close their schemes sooner rather than later.

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