Final salary pensions to become a thing of a past within a decade – and experts are blaming the regulator

 
Oliver Gill
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High profile pension failures have led to greater regulatory scrutiny, experts said (Source: Getty)

Britain's remaining final salary pension schemes will be extinguished within a decade, leading experts warned today.

Increased costs and regulators taking a tougher line are to blame for putting pressure on pension trustees and corporates, meaning they have no choice but to close retirement pots to future accrual.

Jon Hatchett, head of corporate consulting at actuarial firm Hymans Robertson, said the high profile corporate woes of BHS and Tata Steel has led to the Pensions Regulator (TPR) taking a "tougher line".

"The upshot is companies will be under greater pressure from trustees, with the backing of the regulator, to pay more cash towards deficits," he said.

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Hymans Robertson said just over half (55 per cent) of FTSE 350 firm have already shut their defined benefit schemes. By 2027 the remain funds open to accrual are likely to be shut off altogether, the firm said.

Hatchett said:

The regulator’s messaging is bang on for situations where affordability is stretched and covenant risk is high. In these circumstances getting the cash in while you can makes sense. But only five per cent of schemes are in this position.

"The only companies that will be clear of the requirement for more cash are those that have hedged most of their inflation or yield risk, and that are therefore still on track or those where affordability is genuinely stretched."

The TPR agreed it was getting tougher but this was part of changes that also included being clearer and quicker "to protect workplace pensions".

A spokesperson for the watchdog said:

We will intervene where we believe occupational defined benefit schemes are not being treated fairly by employers.

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