Final salary pension schemes will be gone in five years, warn experts
Gold-plated pensions are rapidly becoming extinct for Britain's 23 million private sector workers, research shows.
Nearly 60 per cent of final salary pensions - which guarantee to pay a proportion of your earnings as a pension until you die - are closed to new workers when they join the company.
And each week more schemes are hanging up the "closed" sign. Around 150 firms have done so in the last year.
New employees are instead invited to join a cheaper, less rewarding pension. It is the equivalent, say unions, of a pay cut.
Yesterday's report, by the Pensions Regulator and the Pension Protection Fund, is the first time the full scale of the squeeze has been revealed.
The research, called The Purple Book, warns there is "significant evidence of a trend" for bosses to decide that their final salary schemes are too expensive.
It warns of a "pensions apartheid" between young workers with limited pension benefits and older employees who still enjoy the more generous perks.
Tom McPhail, head of pensions at the financial
advisers Hargreaves Lansdown, said: "There is an overwhelming sense of inevitability.
"If you could fast-forward another five years, there will be hardly any final salary schemes left in the private sector."
Final salary schemes are so attractive because they guarantee a certain income in retirement - typically about two-thirds of a loyal worker's annual earnings.
The pensions that are replacing them, known as "defined contribution" schemes, do not make any guarantees about your pension income.
In theory, your entire pension savings could be wiped out by a stock market crash the day before you retire, leaving you with no income, and no comeback.
The shift has come as companies have woken up to the effects of an ageing population.
The longer workers live beyond retirement, the greater the cost of a scheme that guarantees them a fixed income once they stop working.
Some company schemes have found themselves facing crippling, multi-billion pound shortfalls. One such firm is BT, which closed its final salary scheme to new workers in April 2001.
The company admitted yesterday that its scheme has a £3.4 billion "black hole" between the amount invested in it and the sum it owes to its present and future pensioners.
It will now have to pay £280 million a year for the next decade to make up the difference.
Even the few final salary schemes that are still open are becoming less generous.
The Purple Book said a common tactic is to force workers to pay more into their pension every month in a bid to cut costs.
And it warns that there is even a threat to workers who have been paying in for decades.
It says: "One of the few ways the cost of past service benefits can be reduced is by removing the link to earnings at retirement."
The report examined 5,800 final salary pension schemes, about half of the total.
They have 12.6 million members between them, although just one in four are "active" current workers. The majority are either pensioners or ex-employees who have left the firm for another job.
