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January 4, 2010    

Report reveals more pension woes

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by Kay Murchie
Report reveals more pension woes

Fears over the future of final salary pension schemes has reared its ugly head again after a report from the Association of Consulting Actuaries (ACA) revealed that nine out of 10 such schemes are now closed to new members.

The ACA, which questioned over 300 companies, found that employers continue to shy away from these high cost schemes with 87% of workplace final salary schemes now closed to new entrants and nearly one fifth now closed to future accrual by existing members - double the proportion four years ago.

ACA chairman, Keith Barton, is calling for a “radical change of approach”.

He comments: “Just 6% of employers responding to the survey say they feel the Government’s stated policy of supporting quality workplace pensions is working, down from 38% two years ago.”

The ACA described the problem as a “real crisis” and is urging the Government to deal with the issue as a top priority after this year’s General Election.

Over the last year, a growing number of blue chip companies have announced the closure of their schemes to existing members.

Telecoms company Vodafone announced in November it would close its final salary pension scheme to 4,000 current employees.

Also in November, sugar firm Tate & Lyle and newspaper publisher Trinity Mirror became the latest firms to close their final-salary pension schemes.

Tate & Lyle blamed the decision on a hike in the scheme’s deficit to £110 million which will see the scheme close to half of its UK workforce next April.

Trinity Mirror, meanwhile, which closed its final salary scheme to new joiners in 2003, said its pension deficit increased by £68.6 million in the first half of the year to £275 million as at the end of June.

Last September, Dairy Crest, which is one of the UK’s largest milk firms and makes brands such as Country Life and Clover butter, said it would close its final salary pension scheme to existing members, having closed the scheme to new employees in 2006.

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

Last 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”.

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