As another year approaches, how can human resources professionals ensure staff think seriously about pensions?
Earlier this month, airport operator BAA became the latest major employer to close its final salary pension scheme to new members. And while the immediate headache for the company is the possibility of being hit with industrial action over the busy festive period, the bigger picture shows a major swing over the past five to 10 years towards employers closing their defined benefit (DB) pension schemes to new recruits, and inviting them to join a defined contribution (DC) scheme instead.
These shifting sands on the pensions landscape are putting an onus on HR departments to communicate the implications of these changes to employees, and to act as a go-between linking staff and third-party pension providers.
Put simply, a defined benefit scheme is a pension provision where employees know what they are likely to receive at retirement based on their length of service and salary. Final salary schemes or career average salary schemes are the most common defined benefit schemes.
Defined benefit schemes
Under a DB scheme, the responsibility to deliver the promised pension typically lies with an organisation's finance director, according to Brian Griffiths, chief executive of B&CE Benefits Schemes, a pension provider to the construction sector.
He said: "The finance director must manage the fund on the stock market, knowing they must pay a given percentage of salaries into the pension fund."
However, a growing number of employers feel these schemes are too expensive to keep open. Consequently, many people now entering the world of work are being offered DC schemes. These differ greatly from DB schemes in that, rather than being run by the company, each employee has an individual contract with the chosen pension provider, and takes responsibility for their own pension and retirement.
Another trend has seen many organisations do away with a board of trustees to oversee their pension fund, and appoint specialist companies to manage their pension plans.
"As far as the employee is concerned, with def