Final salary schemes on the way out

PENSIONS analysts sounded the death knell for final salary pension schemes yesterday, after supermarket chain WM Morrison became the third major company in a week to end its scheme.<br><br>The retailer's decision to bring the curtain down on the scheme follows similar moves by Barclays, which transferred 18,000 staff to a hybrid scheme and energy giant BP, which closed its own final salary plan to new members.<br><br>Pensions experts said yesterday that the decisions signalled the end of the line for final salary schemes, which are based on how long an employee has been a member and what their salary was immediately before retirement.<br><br>Such schemes have become increasingly difficult to fund due to plunging investment returns and rising life expectancy.<br><br>Ros Altmann, the pensions expert who led a high-profile political campaign to restore the pensions of Allied Steel and Wire staff when it went into receivership in 2002, said companies would turn to different forms of pension arrangements.<br><br>"Schemes are moving mostly to defined contribution or money purchase arrangements, in which the workers shoulder almost all the risks and costs of providing decent pensions for themselves," she said.<br><br>Employers will also look to cut their share of pension contributions over time if the economic situation remains difficult, she added.<br><br>The domino effect of company pension schemes closing has already hit home with City employees, who blame the increase in tax on pension contributions for high earners announced in the 2009 Budget, a survey revealed yesterday.<br><br>Seven out of 10 Brits believe that company pension schemes could be closed to all workers as a result of chancellor Alistair Darling's changes, the survey by Hyman Robertson said.<br><br>In London, 74 per cent of respondents said they expected pension schemes to close to all workers if high earners above the UK average of 61 per cent pull out.<br><br>Nationally, nearly half of those surveyed said they thought the move to increase the tax on pensions for those earning above 150,000 was a bad idea.