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August 17, 2009    

Half of final salary pension schemes will close

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by Kay Murchie
Half of final salary pension schemes will close

A survey of over 250 employers by consultants Watson Wyatt has revealed that half of Britain’s companies will close final salary pension schemes in the private sector to existing employees between now and 2012.

The survey, conducted in July, also found that another 28% will keep their scheme open to existing members but on less generous terms.

While around three-quarters of all final salary schemes are closed to new members, only 9% are closed to existing members.

Companies that have taken such action include American Express, the credit card giant, who announced that with effect from 1 July, it had suspended pension contributions for its UK employees.

The move, which affects 6,000 members, will see payments stopped for a maximum of 18 months.

Computer giant IBM recently announced it was considering closing its final-salary pension scheme to current members, affecting over 25% of its 20,000 UK workforce.

This followed announcements from other blue-chip companies including banking giant Barclays, oil giant BP and supermarket Morrisons, who all announced plans to close their final salary schemes.

In April, the British subsidiary of the US insurance broker Aon said it planned to reduce its pension contributions to cut its costs - saying it needed to be “protected in challenging conditions”.

Commenting on the survey, Rash Bhabra of Watson Wyatt, said: “When employers are cutting jobs and freezing pay, pension arrangements will inevitably be put under the microscope.”

“At the same time, companies are confronting much bigger deficits. These trends also get their own sense of momentum as companies benchmark themselves against their competitors,” Bhabra added.

Mr Bhabra said the number of pension schemes closing to existing staff could soon accelerate significantly.

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