Money
Pensions
More final salary pensions on the brink
Mounting costs to keep generous final salary schemes running are adding to fears that more will be forced to close, cutting income in retirement for thousands, says Holly Thomas
And Government proposals will add to the already high cost of running the schemes, which guarantee an income at retirement.
The Pensions Regulator has recommended that companies which have been dragging their feet over adjusting their sums and upping their contributions to reflect people living longer, should do so.
It warned company schemes that their liabilities will increase because we are living, on average, two years longer.
Experts estimate 80 per cent of final-salary schemes are already closed to new members, and the gap between those with savings and those without is widening.
In most cases, individuals will have to significantly boost savings themselves, or be much poorer in retirement.
One in four people have no pension savings and will have to rely on the state pension, which currently pays £87.30 a week.
Worringly, research by the Association of Consulting Actuaries (ACA) found that combined employer and employee contributions into alternative money purchase schemes - where cash is linked to the stock market - is just one-third of the cash paid into the more generous, but increasingly scarce, final salary pensions.
Those born in the population explosion after the Second World War are beginning to turn 60, which means there is going to be a huge number of people starting to retire in the next few years.
Many of these people are part of the generation of a 'job for life' who will be able to cash in on final-salary schemes. But many will not.
There is also the threat of fund deficits - three in 10 final salary schemes do not expect to make good their deficits in the next 10 years.
Owain Wright, pensions expert at Saga, said: "With the public's perception of pensions at an all-time low it is hard to envisgage that this will do anything to improve their outlook.
"This has massive implications for employers. Owners may have to put hundreds of thousands of pounds into underfunded schemes and it is hard to imagine any outcome other than more final salary schemes being closed."
Prudential has estimated that 2008 was likely to mark the beginning of the end for such generous retirement settlements.
The average pension pot is low at £25,000. A typical man retiring today at 60 is going to live for another 25 years which means the cash is unlikely to go very far.
As a very rough rule of thumb, experts say you need to save the same percentage of annual income as half your age when you begin saving.
* Holly Thomas is the deputy personal finance editor of the Daily Express and Sunday Express. Holly's opinions are her own and for general information only. Always seek independent financial advice.
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