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Have we seen the death of final salary pension schemes?

With news that British Telecom and Barclays bank are looking to close their final salary pension schemes and replace them with alternative arrangements, there is serious concern that the final salary pension scheme sector will soon close for good. This is the sector which many years has served the UK public very well and afforded attractive pension rates upon retirement.

However, as we covered in some of our earlier post, a reduction in investment returns, a higher cost of living, extended life expectancy and errors by government actuaries have all come into play and created a significant funding shortfall across the sector. With the likes of BT looking towards a potential £2 billion deficit on its pension fund liabilities the pressure is growing on many of the U.K.'s blue-chip operations.

As a consequence it is no surprise to see sensible directors looking to reduce a company's liabilities in the future even if this is at the expense of employees who had expected to be part of a lucrative final salary pension scheme. Many blame the government for various regulatory and taxation changes and the fact that final salary pension schemes have for some time paid "above market rates", although this is open to debate.

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