The report by the National Association of Pension Funds (NAPF) revealed that vast amounts of existing staff, and new employees, will lose out on the scheme because employers want to move staff onto cheaper retirement plans. The annual survey by NAPF showed that 17% of final-salary schemes had become unavailable to existing and new members of staff.
The record jump from previous surveys by NAPF, 7% in the 2009 survey and 3% in the 2010 survey, could mean that is the end of the line for the much-coveted pension scheme. The survey also revealed that a third of employers are planning to make changes to their final-salary scheme by shutting it down altogether or making cuts to benefits that had previously been guaranteed.
It seems that younger staff will be facing the biggest cuts in contributions from employers, as many older staff keep their guaranteed benefits. The NAPF believe that pension schemes have been under huge pressure to cut costs because of market returns and higher life expectancy.
The government has been criticised by unions for letting one of Britain’s most highly regarded private-pension system collapse. In a government review, Lord Hutton will tomorrow issue a report in public-sector retirement plans where he is expected to recommend a retirement age of 65 across the board.
It may come to a point where many employees, especially the younger members of staff, will not have the benefit of building up to a final-salary pension to ensure a good retirement. Contributions will have to be set at the highest level in order for the cheaper alternative retirement plans to provide the same financial security.
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