More companies getting rid of pensions burden

More companies getting rid of pensions burden.

More evidence is emerging on how large UK companies are buying-out of a British pension fund – with the biggest one yet occurring this week, as £1.5 billion were transferred from the EMI’s scheme to Pension Insurance Corporation.

Citigroup had became the music company EMI’s pension-fund sponsor in 2011, when it seized EMI from Terra Firma. EMI’s operating businesses have already been sold, now the bank has got rid of the pension fund.

Under a buy-out, an insurer is paid to take on the burden of paying the final-salary (or defined-benefit) pensions of current and future retirees, setting the sponsoring company free of all its obligations.

British companies have been getting rid of their pension schemes for several years, but the trend has also spread to America. In fact, both General Motors and Verizon offloaded part of their schemes last year.

When companies are faced with the high cost of paying final-salary pensions, many choose to close their schemes to new members, whilst others have switched current workers into stingier defined-contribution schemes.

The main reason behind such move is that most companies can no longer afford to pay employees their pensions, as legacy pension obligations often overshadow the company’s current business, particularly when earnings are smaller than in the past.

Therefore, it has become more important than ever for individuals to take the time to plan their finances and put money aside for retirement, in order to truly secure a sustainable pension. Speak to a deVere Financial Adviser today to learn more about the options available for private retirement planning.

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