Final salary pension schemes edge closer to extinction

by Gill Montia

Story link: Final salary pension schemes edge closer to extinction

Further evidence that final salary (also known as defined benefit) pension schemes are on the road to extinction comes from Aon Consulting, which has recently completed a survey of over 100 pension scheme managers.

According to the research, the number of schemes open to new members now stands at a record low, with 83% of such schemes having closed to new members in recent years.

Around one-sixth of the UK’s final salary schemes remain open to joiners, the proportion having fallen from one quarter in the past five years.

The benefits and human resources firm found that companies with final salary schemes were wary of tighter regulation, volatile markets, increasing longevity and fears over future developments in accountancy rules.

The research also revealed that companies with final salary schemes do better when it comes to retaining staff.

Eighty-one per cent of final salary scheme managers said they allowed further pension accrual in their schemes because they believe the facility increases levels of staff retention.

Meanwhile, the public sector continues to widely offer final salary schemes, leading to accusations that a form of pension apartheid now operates in the UK.