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Can We Blame Companies For Closing Final Salary Schemes?

The pensions industry has gone through some major changes over the last 10 years and there still appear to be many more changes on the way. However, one element which always seems to cause a conflict of opinion is the debate regarding the closure of many Final Salary Schemes and who really is to blame. The work force and the Unions blame the management, the management blame the government, so who is right?

Much of the problems seen today can be traced back to the late 1990s when Gordon Brown was the Chancellor of the Exchequer. In one of his many budgets it was Mr Brown that decided to tax all income created by pension fund investments, going against the protocol of decades prior which saw all pension income retained free of tax.

The change in regulations, which has (and continues to) raise billions of pounds for the Treasury seemed to fly in the face of the government historic and current pension policy - pushing individuals and companies to look after themselves and their employees. As the State looked to reduce the crippling over dependence on the State pension many could not understand the change of regulations.

While there are many other factors, such as people living longer, lower inflation and reduced investment returns, the decision to tax pension fund income has been the major reason why many Final Salary Schemes are being closed or sold on. Perversely, as a result of the change in taxation regulations more and more people will again be depending on their State pension in later life.

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