Employers pull plug on final salary pensions

Nearly
50 per cent of final salary pension schemes have been closed to new entrants
because of concerns over spiralling costs, according to research by KPMG.

The
study found that 88 per cent of companies with final salary schemes saw their
pension costs rise in the past few years and two-thirds expect costs to
continue rising unless decisive action is taken.

The
research claims many employers are already switching from final salary to
defined contribution schemes. It reveals that only a third of firms now operate
a final salary pension scheme, 28 per cent operate a defined contribution
scheme and 36 per cent operate both – evidence that change is already under way.

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David
Fairs, partner in KPMG Pensions said: "It is vital employees make much
higher levels of contributions and are aware of the risks inherent in not doing
so."

Fairs
said pensions are now costing business at least 15 per cent of payroll.