According to a survey by the National Association of Pension Funds, one in every four salary related pension schemes have been closed during 2003. This 25% figure is an increase over 2002's 19%, in terms of final salary pension schemes closed to new staff.
Employers that were surveyed generally said that the move to close final salary schemes in favour of money purchase (or defined contribution) schemes was purely down to cost. However, despite the lower cost to run a money purchase scheme, many employers also pay in less for their employees than the did into the final salary pension scheme.
Our View
You cannot blame employers for closing or limiting their final salary pension schemes. They carry all of the cost to run these schemes and they are the ones that have to make up any shortfalls at retirement.
With the economic climate in a pretty bad way, employers just cannot afford to keep carrying the can for an employee's retirement. The problem we see is that less money is going into pensions, fewer pensions are guaranteed in retirement and more pensions are going to be linked to stock market movements.
We could get to a point where the majority of employees are betting on the performance of the stock market to get a decent pension in retirement.