BusinessCompany NewsSMEs resist winding up final salary schemes

SMEs resist winding up final salary schemes

The majority of UK small and medium-sized companies continue to resist closing their final salary pension schemes despite more than one in five being underfunded.

New research into the SME sector shows that a large proportion of the companies polled stated that they did not want to wind up their final salary schemes because of the negative effect it would have on staff.

Only 3% have decided to axe their schemes, while a third have not yet sought actuarial advice on their options, according to research by consulting actuaries Hazell Carr. David Carr, Hazell Carr director, said: ‘Our real concern is that such a large proportion of the companies we spoke to have not taken advice and, even with advice, that so few have reached the decision to wind up.’

The second reason companies gave for not winding up their pension schemes now was they believe it would be too expensive.

Unlike many larger companies that have partly blamed the controversial accounting rule, FRS 17, for closing their schemes, SMEs said stock market volatility and increasing costs were the greatest threats.

Only 13% cited FRS 17 as the biggest obstacle to maintaining their final salary schemes.

The findings are in stark contrast to the number of the UK’s largest employers that have either closed their schemes or plan to. Others, including Ernst & Young and Iceland, have said they will close their schemes to existing members, as well.

Hazell Carr interviewed finance directors and pension managers of 100 companies of varying sizes in April.

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