Final salary pension scheme funding hits UK business hard

The funding of final-salary company pension schemes is burning a hole in the profitability and competitiveness of UK companies, new research has found.

A survey of just under 250 senior executives conducted by the Confederation of British Industry (CBI) in conjunction with business consultant Watson Wyatt found 54% of firms said growing contributions made to defined benefit ‘final salary’ schemes are harming profits and competitiveness.

Four in 10 respondents said pension costs forced them to cut back on other employee benefits and 27% said they had to cut investment.

John Cridland, CBI deputy director general said it was clear that the large and growing burden of defined benefit pension contributions was taking its toll on future jobs, investment and growth.

The survey also found that less than one in 10 respondents thought firms should provide final salary pensions for all their employees, but 86% said they wanted their staff to retire with adequate savings.

Interestingly, 22% of employees approaching retirement had asked for their retirement to be postponed, according to the CBI, while companies had granted nearly three-quarters of these requests.

“Businesses are determined to help provide a decent retirement for their staff, and see a good pension scheme as a big advantage when recruiting,” Cridland added.

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