Employers urged to reconsider scrapping final salary schemes

Employers should resist pressure to close final salary pension schemes to existing employees, people management experts, The Chartered Institute of Personnel and Development (CIPD) have said.

CIPD Employee Relations Advisor Mike Emmott said that while development of the occupational pension scheme had been one of the real successes of post-war Britain, it was well known that employers could not support open-ended obligations which are influenced by factors outside their control.

Changes to tax and accounting requirements, as well as declining stock market returns have also delivered a body blow to the affordability of the traditional pensions scheme, the CIPD said.

It also argued that closing existing arrangements works against effective recruitment, retention and motivation of staff. A defined benefit scheme is increasingly seen as an important part of the reward package – and in the “war for talent” it is not something that should be dispensed with as a short-term response to external pressures.

Government was also told to look urgently at relieving the burden, for example, by re-instating the ACT (Advanced Corporation Tax) relief and by ensuring that funding and reporting calculations are taken over a longer period.

Many leading UK companies have recently declared that they are abandoning final salary schemes for employees.

(MB)