Why final salary schemes could soon be pensioned off

Jul 1 2009 by Peter McCusker, The Journal

THERE are around 100 companies in the North East still providing final salary pension schemes, but for how long will that situation last? Peter McCusker reports.

The issue of pension provision is coming increasingly to the fore and will impact on all companies from 2012 when all employers will be required to make a 3% financial contribution to pension schemes for staff earning between £5,035 and £33,540.

And the final salary pension benefits enjoyed by many public sector workers are also coming under scrutiny as the UK’s national debt is set to rise to 100% of GDP and politicians look to reduce public spending.

Mr Bottomley added: “Pensions apartheid is upon us, with a growing gap between the relative generosity of the public sector and the intention of more than a third of private sector employers to provide the bare minimum under the 2012 auto-enrolment pension requirements.”

Liz Mayes, assistant regional director of the CBI North East, said: “We recently put forward some key recommendations to the Pensions Regulator on what needs to be done to ensure that businesses struggling in the recession are not hit further by the costs of their final salary pensions schemes.

“Companies recognise that these can form a key employment benefit for their staff, and are doing what they can to preserve their schemes through the downturn. One of the key asks of the pensions regulator was that they give firms longer to fill any deficit – we cannot forget that the lifespan of pensions schemes can be very lengthy and the regulations must reflect this.”

However this latest PwC survey suggests many private employers are not prepared to continue with final salary schemes – and their end in the North East and the rest of the UK looks imminent.