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UK plc set to cut pension contributions

In a move which could have long-term consequences for a growing number of workers in the UK it has been revealed that Aviva , the U.K.'s second largest insurer, is set to scrap free pensions for defined contribution members. Aviva is the latest in a long line of companies looking to reduce their pension payments for defined benefit schemes with employees having to pay 1% of their salary from July this year, rising to 2% in April 2010.

The company is also looking for a wider ranging reorganisation of pension fund liabilities as the ever-growing pension shortfall in UK continues to mushroom. Defined benefit schemes are now near non-existent in the private sector with the UK government and UK local authorities now controlling the vast majority of remaining defined benefit arrangements. The insistence that local authorities and government agencies continue with defined benefit schemes is costing the taxpayer more and more money each year as they need to cover ever-growing shortfalls.

Experts in the field of pensions believe the problems being encountered by UK plc can be traced back to Gordon Brown's time at the Treasury and the introduction of taxes on pension arrangements. This not only reduces annual funds available for investment but also reduces the reinvestment returns possible into the future. The UK pension industry is currently in disarray with more and more schemes substantially underfunded and more and more employers struggling to make up the shortfall.

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