IT IS of little surprise that more firms are looking to freeze their final salary pension schemes, according to Guernsey Association of Pension Providers chairman Stephen Ainsworth.
According to the results of a PricewaterhouseCoopers survey published on Tuesday, 55 firms out of 157 who replied intended to freeze their schemes for members within the next five years, while 16% had already closed their schemes to current members.
And 96% of companies who responded believed their schemes were unsustainable.
The trend was also the same in Guernsey, added Mr Ainsworth (pictured).
‘It’s much the same here as it is in the UK. Most employers have been reviewing their pension arrangements and many that have final salary pension schemes have closed them to new members and moved towards defined contribution schemes.
‘Within the islands we have been following the trend seen in the UK, maybe a little behind, but we are moving pretty much in the same direction.’
He said the reasons for the change in direction in terms of pension schemes was two-fold locally, and three-fold in the UK.
Both Guernsey and the UK were suffering from the fact that investment returns were very poor and pension assets were down as a result, but also that people were living longer, meaning pension payments had to be paid for many more years.
The third factor, and only affecting the UK, was that under its pensions legislation, if there is a deficit in the pot, then the employees’ company have to pay in contributions to make up the shortfall.
‘It’s fairly new legislation, but companies have had to pay in major contributions they weren’t expecting.
‘For all these reasons and the major uncertainties about what future pension costs may be, and in the interests of the company and its shareholders, many have decided they need to make a change. With defined contribution schemes they know exactly what is going in and there’s no extra liability beyond that.
‘I think we are going to see many fewer final salary pension schemes going forward. There will still be some, and the ones in the public sector are probably going to be with us for longer, but there is definitely going to be less of them.’
Article posted on 26th June, 2009 - 2.30pm
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