Final salary pension provision drops to all-time low

The number of final salary pension schemes that remain open to new members has dropped to an all-time low.  

Of the 100 final salary schemes surveyed for Aon Consulting’s 2008 Employer Survey, just 17% are still open to new members, compared to 28% in 2007 and 50% in 2003. Of those that still offer a final salary scheme to new entrants, 32% said that closing the scheme was “too painful” to contemplate, which is up from the 17% that said the same last year.

Over three-quarters (81%) of employers, however, are continuing to allow further pension accrual for scheme members, mainly to remain competitive when looking to retain employees. 

A number of factors have made it more difficult for companies to continue to offer final salary schemes. These include tighter regulation of pension schemes, volatile market conditions, strengthening of longevity assumptions and concerns over future developments in accounting for pensions.

June Grant, principal at Aon Consulting, said: “With the number of final salary schemes plunging to a record low, they have now become gold dust for the employees that still have them. Employers can turn this to their advantage because the schemes give them a competitive edge in the fight to attract talent.”