Quarter of final-salary pension schemes closed

| December 16, 2011 | 0 Comments
Quarter of final-salary pension schemes closed

Nearly a quarter (24 per cent) of private-sector final-salary pension schemes were closed in 2011, according to the National Association of Pension Funds (NAPF).

In comparison, just 3 per cent of final-salary pension schemes closed in 2008, while the proportion increased to 17 per cent in 2010.

It is estimated that the closure of this type of pension, which guarantees a payout based on earnings at the end of a career, has affected 250,000 employees in the past three years.

Many employers are moving staff over to defined contribution schemes, where payouts are based on contributions and returns on investment, placing the risk on employees rather than employers.

Only 19 per cent of private sector final-salary pension schemes are still open to employees according to the NAPF.

Joanne Segars, NAPF’s chief executive said: “The private sector is seeing a seismic shift in its pensions, and more change is certain. Final-salary deals are coming off the table and are either being watered-down or replaced altogether.

“Demographic and financial pressures mean businesses are struggling to afford these pensions,” she continued.

The NAPF is calling for the government to make it easier for companies to move their pension provision to a career average scheme.

This type of scheme calculates the member’s annual pension based on their average earnings over the total number of years they have been in the scheme.

Last week employees of consumer goods maker Unilever went on strike over the closure of their final salary pensions scheme.

It was the first time that Unilever employees in Britain had taken this type of industrial action.

Union members decided to go on strike after the company said in would no longer continue talks over the pension change, following an eight-month dispute.

Unilever plans to move its 5,000 members’ final salary pensions to a career average scheme by July 2012.

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