‘New phase’ in final salary closures

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Final salary pension schemes closed their doors to existing members at a record rate during 2010.

Around 17 per cent of companies have closed final salary schemes to existing, as well as new, members, up from 7 per cent in 2009 and 3 per cent in 2008, according to the National Association of Pension Funds.

A further 33 per cent of companies are planning to make changes to their scheme, such as cutting the benefits they offer, or moving staff into less generous defined contribution pensions, under which individuals shoulder all the risk.

The group said the research pointed to a “new phase in the decline” of the schemes after a wave of companies closed the pensions to new members of staff as they became increasingly expensive to offer in the face of rising life expectancy and volatile investment returns. Only 21 per cent of final salary pension schemes are still open to new joiners, compared with 88 per cent 10 years ago.

Joanne Segars, chief executive of the NAPF, said: “The pressures on final salary pensions are relentless, and their rate of decline seems to be shifting into a new gear.”