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Nine out of ten final salary pension schemes to close

A report by PricewaterhouseCoopers has revealed that nine out of ten private sector businesses in the UK are set to close their final salary schemes to existing members. Many of the companies surveyed have already closed their final salary schemes to new members and are set to extend this to existing members. In simple terms, members will be encouraged to transfer to cheaper alternatives with bonuses and additional payments likely to be included in any transfer package.

The move away from defined benefit pension schemes, where the liability of the company is linked to the final salary of members, to money purchase alternatives, where an individual's pension pot is used to acquire a pension in the market, could literally save many firms millions of pounds a year. There is no doubt that the pension crisis in the UK has been building for many years and while a number of members will be encouraged to transfer to alternative arrangements, and offered incentives, they need to take advice regarding their long-term pension arrangements.

Each day seems to see more and more companies announcing significant deficits in their final salary pension schemes while those in the public sector continue to enjoy goldplated pension arrangements. The differential between the two areas of the UK economy, i.e. the public sector and the private sector, has never been greater on this front.

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