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.
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
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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