Financial Advice UK - Pensions News - Pension shutdown 'threatens millions'

It has been revealed that the Chancellor Alistair Darling held talks with some of the UK largest banks yesterday in a bid to try and avert a banking crisis in the UK. The meeting was attended by...
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Pensions News - Last Updated Wednesday 11th July 2007

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Pension shutdown 'threatens millions'

Wednesday 11th July 2007

Millions of young and middle-aged people could find themselves without sufficient retirement funds because of the government's failure to respond to company scheme closures, the Association of Consulting Actuaries (ACA) has warned.

A new survey published today shows that 81 per cent of firms do not offer their defined benefit pension schemes to new entrants, up from 69 per cent two years ago.

The ACA argues this reflects growing pressures on companies maintaining their pension schemes.

It points to findings in its survey showing the proportion of employer contributions rising from 11.5 per cent of earnings five years ago to 22.6 per cent today.

"The big downside of the scheme closures that have taken place as private sector employers have de-risked for the future is that we are facing the very real prospect of growing 'under-pensioning' in respect of millions," ACA chairman Ian Farr said.

He said the failure of company pension schemes now would drive up retirees' reliance on means-tested state benefits in the future, hitting other taxation requirements in years to come.

"The government must act quickly to encourage pension provision that is better than a minimum level through personal accounts, where we feel there is some over-optimism in terms of the scale and the reliability of the pensions that this scheme will deliver," Mr Farr added.

A Department for Work and Pensions spokesperson said: "The government has proposed wide-reaching reforms to tackle the problem of people not saving enough and the longer term demographic trends as well as doing all we can to support existing pension provision.

"Our reforms will make saving for retirement the norm, through automatic enrolment into a system of personal accounts or a qualifying workplace scheme."