Final salary pension benefits ‘may be thing of the past’

The UK is heading towards a time when nobody benefits from a final salary pension scheme, it has been warned.

New figures recently released by the Pension Protection Fund show a cut in the deficit of final salary pension schemes.

At the end of January 2010, a deficit of £51.9 billion existed, which reduced to £15.1 billion at the end of February.

This means the total deficit of schemes in arrears in February 2010 is estimated to have improved to £79.5 billion from £102.8 billion at the end of January.

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However, commenting on the findings, Gordon Forbes, managing director of Caledonia Asset Management, said the true cost of any final salary pension scheme is whether there are enough assets within it to buy out all the liabilities.

“Therefore every scheme in the UK is in deficit and will always be in deficit, until the whole scheme winds down to the point where there won’t be anyone left,” he warned.

Mr Forbes noted the problem with many final salary schemes was that they had too many advisers which added up to a high cost, meaning the UK is at risk of heading towards a similar situation to Australia, where only a few public sector workers benefit from such a programme.

Posted by Cameron Thomson