Firms look to offload pension liabilities as burden intensifies

Steve Dinneen
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ALMOST two fifths of UK firms plan to offload some of their dangerously bloated pension scheme liabilities within the next three years, paying a massive premium to insurance companies to take them off their books.

One in ten expect to completely shift their pension pots to an insurance firm by 2013, according to the research by Buck Consultants.

Just seven per cent of companies have so far transferred some of their pension liabilities to a third-party insurer in the past three years, while six per cent have transferred all their liabilities.

Cadbury (see right) last year transferred £500m of pension assets to an insurer.

The research also shows that 73 per cent of companies believe defined benefit schemes, where employees retire on a fixed percentage of salary, will cease to exist within 10 years as funds struggle to cope with longer life expectancy. In 2000, there were only seven companies in the FTSE 100 that had closed their defined benefit scheme to new entrants. Now only three — Tesco, Cadbury and Diageo — still offer it to new members. This is compared to around 20 per cent of smaller companies. Vodafone, Barclays, Whitbread and Fujitsu have gone further and closed them to existing employees.