Another body blow for the final salary pension
23 Jun 08
Not content with closing schemes to new members, employees are increasingly barring existing scheme members from topping up their DB pensions
Employers continuing to run a defined benefit (or “final salary”) pension scheme aren’t just drinking in the Last Chance Saloon. Many of them are dashing to the exit – and their employees risk getting trampled in the stampede to get out.
The latest survey by PricewaterhouseCoopers of UK employers indicates that 16 per cent have already closed their DB schemes to future accruals by existing employees and a further 11 per cent expect to do so in future. Also, more than a third are looking for a buyout solution for some or all of their existing pension liabilities.
PwC partner Marc Hommel says: “There has been a mass transfer of risk from employers to employees in relation to retirement savings. It is time for companies to step up and help their employees navigate the consequences of this sea change.”
Hommel is quite right. Ironically, employees value a good quality pension more than ever (whatever you may hear about today’s “Generation Y” living for the moment). But changes under way mean they are desperately short of good advice.
Employers looking to make big changes in the pension provision, including offering individual scheme members a deal to surrender their rights or transfer their pension out have a moral obligation to ensure those concerned have all the information and guidance they need. This will be even more crucial as 2012 approaches and the UK Government introduces “soft compulsion”, with millions more individuals being brought into the retirement savings system through sheer inertia. If Government and employers get this wrong it will make the endowments mis-selling scandal look like a minor faux pas.