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Friday 28th of August 2009
August 20, 2009    

Final salary pension schemes face extinction

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by David Masters
Final salary pension schemes face extinction

Final salary pension schemes may not have breathed their last breath, but they are certainly on the throes of extinction, an industry expert has claimed.

Dr Ros Altmann, a former academic and independent expert on pensions policy and retirement, said when final salary pensions were first conceived, it was assumed they would be funded through equity returns.

These assumptions were fuelled by “exceptional” equity returns in the 1980s and 90s, Altmann said, but to assume that this level of returns could continue indefinitely was “unrealistic”.

“The writing has been on the wall for quite some time for salary pensions, and as soon as they started closing to new members, that was it really,” she said.

“The truth is that even if the employer can afford to pay money in today, the final salary scheme involves being able to pay money in 50 or 60 years time and no employer can really sign up to that anymore.”

Altmann studied at University College London, the London School of Economics and Harvard University, before working with the UK government on pensions and retirement policy.

Recent research by Watson and Wyatt found the number of final salary pension schemes open to new entrants is expected to drop to 2% by 2012.

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