A pension consultancy firm recently undertook research into final salary (otherwise known as defined benefit) pension schemes, as more and more seem to be closing.
The research revealed that when companies reviewed their final salary schemes over the last five years, almost 60% decided to close the scheme to new memberships. Only a third of the companies reviewing their situations decided to leave matters unchanged.
Final salary schemes are very expensive to run and with margins being cut everywhere, they become more of a financial burden on employers. 80% of the companies closing schemes to new members cited cost as the main reason.
Different pension schemes have been implemented for new joiners. The most popular has been money purchase or defined contribution schemes. This way, the cost on the employer is not totally open ended. Other schemes, such as Stakeholder have been popular.
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