Another final salary pension scheme is to shut down, potentially lowering the income of some UK employees.
Vodafone, a British mobile phone company, said it was planning to close its plan for 4,000 current members.
This follows the firm’s decision to close the scheme for new customers in 2005.
Final salary, or defined contribution, pension schemes offer savers comparatively strong guarantees over future incomes.
This means that underperformance of the fund’s underlying investments must be made up for by the employer themselves.
Therefore, final salary is often more expensive to run than cheaper alternatives – but results in members receiving higher pensions than they would have otherwise.
A further alternative to employee pensions is equity release plans, through which a retiree can generate an income through value stored in their home.
This option could prove particularly attractive to those who have retired on an unexpectedly low sum.
"The action by Vodafone confirms the results of a very recent poll undertaken by us across over 100 major UK employers," Mark Duke at pension advisers Towers Perrin told the BBC.
"We anticipate that many will take action similar to Vodafone while others will find different ways to mitigate the rising cost of promising a pension to employees."
Posted by Claire Ford
