Death Knell for Final Salary Pensions; 75,000 Workers Lost Pensions Last Year Alone; Companies Admit [Pounds Sterling]170bn Black Hole; 6 in 10 Private Schemes Could Slash Benefits; (Unless You Work in the Public Sector)
Byline: Becky Barrow and James Salmon
MORE than 75,000 private-sector workers were robbed of their finalsalary pensions last year, shocking Money Mail research has revealed.
And a report from the Association of Consulting Actuaries warns that finalsalary pensions in the private sector which accept new joiners are 'all but extinct'.
It comes as figures, published today, show that the pensions black hole of the FTSE index of Britain's 350 biggest public companies is ballooning.
At the end of 2009, they were underfunded by [pounds sterling]170billion, compared to just [pounds sterling]60 billion at the end of 2008, according to the pensions expert Mercer.
Britain's economic crisis led many companies to axe these gold-plated pensions.
Tom McPhail, head of pensions research at financial adviser Hargreaves Lansdown, says: 'Within a couple of years, I'd be surprised if there are any workers left who still have a final-salary pension in the private sector; 2009 was the year they died.' Final-salary pensions promise to pay a percentage of a worker's earnings on retirement. The payout is guaranteed and inflation-proof. Employers pay on average 23 pc of an employee's salary into a finalsalary pension, compared with 6pc to 7pc with most alternative schemes.
For many years, private-sector firms have been shutting them to new employees, but existing workers could carry on building up their generous pension pot.
However, everything changed last year, with companies rushing to ditch these pensions, which are dangerously expensive to run.
Around 30 employers, including corporate giants such as Vodafone, Dairycrest and IBM, have closed, or are consulting on the closure of, their final-salary pensions to existing workers. Others include West Bromwich Building Society, the housebuilder Barratt Homes and the airline BMI. Some closures affected as few as 75 workers while others hit up to 18,000.
Most workers are now being pushed into cheaper alternatives, typically a defined-contribution pension that effectively turns the pension into a gamble on the stock market.
A few have switched to pensions linked to career average earnings, rather than final salary.
Meanwhile, the Association of Consulting Actuaries (ACA) found a record 87 pc of employers refuse to let new workers join their finalsalary schemes. The report confirms that soaring numbers are closing their doors to existing workers too; 18pc, double the number from just four years ago, have shut down to future accrual.
The ACA report says there is a 'real crisis', adding that it is 'difficult to see anything other than a deteriorating climate for pension saving unless there is a radical change of approach'.
Nearly 60pc of the 309 firms polled by the ACA say they will review pensions ahead of 2012, when the Government says all firms must start paying into a pension for their employees.
The research highlights the pensions apartheid between the private and the public sector.
More than 90pc of the public sector get a final-salary pension, subsidised by taxpayers. …