Final salary schemes face further risk
Industry leaders are warning ministers that the future of final salary schemes has been further endangered following the chancellor's decision to raise employers' national insurance bills by 1%.
Many of the UK’s largest employers have shut their final salary pension schemes to new entrants and many have closed them to existing members.
The National Association of Pension Funds and the Association of British Insurers now say the Budget change, which is predicted to cost business around £4bn a year, will force companies to look for other ways of cutting costs.
Peter Thompson, NAPF chairman, reportedly told Alistair Darling, work and pensions secretary, in private, that he knew of companies looking to cut other payroll costs with pensions being the obvious target.
Pension industry leaders say that FRS 17, the new controversial pensions accounting standard, is also leading to companies closing their final salary schemes.
Their concerns over FRS 17 were today again echoed.
Kevin LeGrand, head of technical services at Buck Consultants wrote in the FT: ‘It seems that a growing number of finance directors are foreseeing difficulties in explaining the true cost to the company of their defined benefits scheme. That in itself is an indication that there is something amiss with FRS 17.’