Employers warn pension schemes could close althogether if the Pensions Regulator’s goes ahead with its plan to impose new rules next year to increase life expectancy rates, two reports revealed yesterday.
Each year added to life expectancy in a final-salary scheme increases the costs of providing retirement income by 4% and an increase of three years would push many schemes into deficit, the Guardian reports.
The CBI warns the regulator’s ‘heavy-handed approach’ to life expectancy would dramatically increase the costs of running final-salary schemes and force more companies to close them to new entrants or shut them altogether, while a separate report by the National Association of Pension Funds says the decision would ‘place unnecessary pressure on defined-benefit pension schemes’.
The reports were in response to plans announced this year by the Pensions Regulator for companies to adopt a more conservative interpretation of mortality rates. The regulator said most companies based their calculations on male workers living until 85 or 86 on average, while the regulator believed a more realistic figure was 89.
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