Pension shutdown 'threatens millions'

11-07-2007

Pension shutdown 'threatens millions'
Millions of young and middle-aged people could find themselves without sufficient retirement funds because of the government's failure to respond to company scheme closures, the Association of Consulting Actuaries (ACA) has warned.

A new survey published today shows that 81 per cent of firms do not offer their defined benefit pension schemes to new entrants, up from 69 per cent two years ago.

The ACA argues this reflects growing pressures on companies maintaining their pension schemes.

It points to findings in its survey showing the proportion of employer contributions rising from 11.5 per cent of earnings five years ago to 22.6 per cent today.

"The big downside of the scheme closures that have taken place as private sector employers have de-risked for the future is that we are facing the very real prospect of growing 'under-pensioning' in respect of millions," ACA chairman Ian Farr said.

He said the failure of company pension schemes now would drive up retirees' reliance on means-tested state benefits in the future, hitting other taxation requirements in years to come.

"The government must act quickly to encourage pension provision that is better than a minimum level through personal accounts, where we feel there is some over-optimism in terms of the scale and the reliability of the pensions that this scheme will deliver," Mr Farr added.

A spokesperson from the Department for Work and Pensions did not immediately comment on the ACA's findings.


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