End of Final-Salary Schemes Predicted by New Report

Pension savings funds at FTSE 100 firms have fallen into a £41 billion deficit, a decline which could lead to final-salary schemes being discontinued by employers.

A report from actuarial business Lane, Clark & Peacock also showed that, a year ago, this figure stood in surplus by £12 billion. This means that funds experienced their steepest annual rise or fall for five years in 2007/08.

Volatility on global equities markets, in which many pension funds are heavily invested, were blamed by Lane, Clark & Peacock for the sharp decline in value. However, the firm added that, given the severity of the ongoing credit crisis, these results could have been much worse.

An end to generous final-salary workplace schemes was also predicted by the new report, with many firms feeling the squeeze and passing it on to savers. Independent pensions expert Ros Altmann said: "It is inevitable that employers will keep on closing schemes to both new and existing members, especially in the face of so much uncertainty around funding and costs. This is the final chapter."

Lane, Clark & Peacock partner Bob Scott added: "UK pension schemes of FTSE 100 companies enjoyed a brief period of surplus until early in 2008…Events of the last year demonstrate the importance of assessing and managing pension risks and being prepared to take opportunities when they present themselves."

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