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| 'Threat' to final-salary pensions | 'Threat' to final-salary pensions |
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| A total of 55 firms who responded to a survey intend to freeze their final-salary pension scheme for existing members within the next five years. | A total of 55 firms who responded to a survey intend to freeze their final-salary pension scheme for existing members within the next five years. |
| Accountancy firm PricewaterhouseCoopers asked 1,000 companies and of the 157 who replied, 16% had already closed their schemes to current members. | Accountancy firm PricewaterhouseCoopers asked 1,000 companies and of the 157 who replied, 16% had already closed their schemes to current members. |
| Almost all who responded said final-salary pensions were "unsustainable". | Almost all who responded said final-salary pensions were "unsustainable". |
| The TUC said companies were using the recession as "an excuse to make savage cuts in pensions". | |
| In the past, the trend has been to prevent new, not existing, employees from joining final-salary schemes. | In the past, the trend has been to prevent new, not existing, employees from joining final-salary schemes. |
| One of the big issues of the next generation is how are employers and government going to deal with the fact that people are not going to be able to afford to retire Marc Hommel, PricewaterhouseCoopers | One of the big issues of the next generation is how are employers and government going to deal with the fact that people are not going to be able to afford to retire Marc Hommel, PricewaterhouseCoopers |
| But the survey suggests in future the expense of running the schemes will force employers to close final-salary schemes - a form of defined-benefit scheme - to current members as well. | But the survey suggests in future the expense of running the schemes will force employers to close final-salary schemes - a form of defined-benefit scheme - to current members as well. |
| Earlier this month, Barclays became the latest big UK firm to freeze its final-salary scheme to existing members. | Earlier this month, Barclays became the latest big UK firm to freeze its final-salary scheme to existing members. |
| The survey by PwC, which included 33 FTSE 100 companies, indicated that four in five of those who responded, or 81%, had already closed their defined-benefit scheme to new members of staff. | The survey by PwC, which included 33 FTSE 100 companies, indicated that four in five of those who responded, or 81%, had already closed their defined-benefit scheme to new members of staff. |
| Employers said that final-salary schemes were becoming too expensive with concerns about risk and the need to reduce cost identified as the key forces for change. | Employers said that final-salary schemes were becoming too expensive with concerns about risk and the need to reduce cost identified as the key forces for change. |
| TUC general secretary Brendan Barber said: "Companies are using the recession as an excuse to make savage cuts in pensions. But recessions are short term, and pensions are long term investments that can ride ups and downs in the economy. | |
| "Too many attacks on pensions are no more than companies walking away from a long-term commitment to their staff, and are part of the same short-term profit-seeking that gave us the financial crash." | |
| Funding retirement | Funding retirement |
| FINAL-SALARY PENSION SCHEMES Final-salary pension schemes promise to pay a retirement income based on a percentage of your salary every year for the rest of your lifeThe amount you get depends on how long you have spent working for your employer and how much you were earning at the time you gave up work - your final salaryThe sum is typically between a half and a third of your salaryRevenue and Customs rules allow members to build up a pension equivalent to two-thirds their final salary | |
| Marc Hommel, partner and UK pensions leader at PwC, said that the survey indicated that more people were going to be forced into postponing their retirement. | Marc Hommel, partner and UK pensions leader at PwC, said that the survey indicated that more people were going to be forced into postponing their retirement. |
| "This survey is reinforcing that fewer and fewer people who work in the private sector in the UK can look to their employer for a good quality pension," he said. | "This survey is reinforcing that fewer and fewer people who work in the private sector in the UK can look to their employer for a good quality pension," he said. |
| "One of the big issues of the next generation is how are employers and government going to deal with the fact that people are not going to be able to afford to retire." | "One of the big issues of the next generation is how are employers and government going to deal with the fact that people are not going to be able to afford to retire." |
| Defined-benefit pensions - which include final-salary and career-average schemes - pay out a fixed amount during retirement, no matter how the investment performs. The payment is based on career earnings and the number of years in service. | Defined-benefit pensions - which include final-salary and career-average schemes - pay out a fixed amount during retirement, no matter how the investment performs. The payment is based on career earnings and the number of years in service. |
| With life expectancy rising and funding deficits ballooning as a result of the credit crunch, employers are now less willing to shoulder the burden. | With life expectancy rising and funding deficits ballooning as a result of the credit crunch, employers are now less willing to shoulder the burden. |
| According to the Pension Protection Fund (PPF), the shortfall in the UK's 7,400 defined-benefit schemes stood at £179.3bn at the end of May. By contrast, one year ago there was a surplus of £51bn. | According to the Pension Protection Fund (PPF), the shortfall in the UK's 7,400 defined-benefit schemes stood at £179.3bn at the end of May. By contrast, one year ago there was a surplus of £51bn. |
| Companies are increasingly moving staff into defined-contribution pension schemes - whereby workers pay money into a pension fund which is ultimately used to buy a financial product called an annuity that provides an income in retirement. | Companies are increasingly moving staff into defined-contribution pension schemes - whereby workers pay money into a pension fund which is ultimately used to buy a financial product called an annuity that provides an income in retirement. |
| Everything is up in the air at the moment. It's just a case of planning and waiting and seeing how things develop Garry Rothwell, whose defined-benefit scheme closed | |
| Whilst employers make contributions toward such schemes, normally at a percentage of salary, the key difference is that the risk of the size of the pension is transferred to the employee. | Whilst employers make contributions toward such schemes, normally at a percentage of salary, the key difference is that the risk of the size of the pension is transferred to the employee. |
| 'Up in the air' | 'Up in the air' |
| Garry Rothwell, who works for Crown Paints, paid into a defined-benefit pension for 20 years before it closed. He says that changes to his pension arrangement may mean he has to put his retirement plans on hold. | Garry Rothwell, who works for Crown Paints, paid into a defined-benefit pension for 20 years before it closed. He says that changes to his pension arrangement may mean he has to put his retirement plans on hold. |
| "It's hard to plan for the future in the respect that where you were expecting x amount of money there's going to be a shortfall there and it's whether you'll be able to meet anything beyond that," he said. | "It's hard to plan for the future in the respect that where you were expecting x amount of money there's going to be a shortfall there and it's whether you'll be able to meet anything beyond that," he said. |
| "Everything is up in the air at the moment, it's just a case of planning and waiting and seeing how things develop". | "Everything is up in the air at the moment, it's just a case of planning and waiting and seeing how things develop". |
| The demise of final-salary pension arrangements in the private appears to be placing more pressure on the public sector. | The demise of final-salary pension arrangements in the private appears to be placing more pressure on the public sector. |
| Some 88% of respondents felt that the public sector had an unfair advantage in being able to continue defined-benefit pensions. | Some 88% of respondents felt that the public sector had an unfair advantage in being able to continue defined-benefit pensions. |
| Mr Hommel added that "the collapse of defined benefit pensions in the private sector is occurring against a backdrop of relative generous public sector provision". | Mr Hommel added that "the collapse of defined benefit pensions in the private sector is occurring against a backdrop of relative generous public sector provision". |